50% of Hedge Fund Failures Due To In-House Errors
March 17, 2003
Of the 100 hedge funds that have failed over the past 20 years, 50 of them shuttered due to misrepresentation of fund investments, misappropriation of investor funds, unauthorized trading or inadequate resources, according to Capco. More careful due diligence could have prevented such mistakes, according to the financial services technology firm.
Contrary to wide perception, the majority of hedge funds have not shut down due to poor performance, although that was the second-biggest reason, for 38% of the companies.
"On the back of poor investment performance, managers modified the valuation of their funds and/or their investment results to buy time until actual results hopefully improved," according to Capco.
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