Impact of disclosure
The disclosure of detailed position-level data is seen as compromising the performance of hedge funds, a new survey by Capital Market Risk Advisors and the International Association of Financial Engineers says.
At issue is the transparency of disclosure, and whether the release of such data compromises a hedge fund’s competitive edge.
As Mark Anson, chief investment officer of the California public employee pension fund CalPERs says: “Transparency is an issue for all investors. However, there must be a balance between the disclosure of meaningful information to investors and the protection of a hedge fund manager’s proprietary knowledge.”
“The Investor Risk Committee conducted this survey as a step towards striking the appropriate balance,” Anson says. “While investors, funds of funds and individual hedge fund managers appear to agree, in general, regarding whether disclosing position-level data compromises the performance of a fund,” the two organisations said in a statement, “the percentage of participants who believe that it has a ‘significant or material impact’ varies significantly by participant type.”
The survey found that 66% of investors thought the disclosure of position level data compromised a hedge fund’s performance – depending on strategy. And 34% of investors felt it had minimal or no impact. Amongst funds of funds respondents, the figures varied slightly. In this category, 55% of respondents thought position-level disclosure was a problem, depending on strategy. Eleven percent felt it had a significant of material impact; 34% saw minimal or now impact.
Amongst hedge funds themselves, 44% said it depends on strategy, 32% said it had a significant or material impact – 24% saw minimal or no impact.
The IAFE’s investor Risk Committee and CMRA surveyed institutional investors, hedge funds and funds of funds. They said the institutional investors had $479bn in capital under management; the funds of funds had $36bn under management while the individual hedge funds that replied had $109bn under management.