Hey guys, A quick quesiotn with regards to GIPS/COE and Hedge funds… From what i’ve been reading would i be making the right assumption that majority of the Hedge funds today, are not complaint with GIPS or the COE…please find the following extract: This is particularly true for hedge funds, since they do not have to adhere to performance presentation standards. As managers may simply stop reporting the performance of funds that perform poorly, hedge fund indexes and databases may only include funds that have survived. A) “Dont have to adhere to performance presentation”, from which body of standards…the SEC? surely not from GIPS or COE?. Some explanation would be appreciated…Thanks a mil.
In terms of COE, every chart holder “should” be in compliance, GIPS as you know is on a voluntary basis, so they don’t need to comply. Hedge funds are legally structured as an offshore corporation or limited liability mainly to take advantage of a tax code (subchapter S) which limits the amount of investors. For the exam, know that hedge funds suffer from survivor ship bias, have a higher e®, lower st. dev. and higher Sharpe ratio than equity…but close to bonds. In terms of the SEC, they don’t comply with MOST securities acts.
Thanks… nice summary, highlighted what i’ve just been reading…Which concludes my CFA curriculum readings!!! Finally!!! Ok, time to crack on with the questions. Cheers
Northeastern Student Wrote: ------------------------------------------------------- > In terms of the SEC, > they don’t comply with MOST securities acts. Hedge funds comply with all securities acts; it’s just that they are given exemptions from some of them. Running a hedge fund doesn’t mean you can do things like short companies when the SEC says you can’t and you can get busted for insider trading, fraud, etc. just like anyone else.
Phrased wrong!