Managed accounts can help cut the operational risks of investing in hedge funds, according to a new study by Jean-Rene Giraud of the French business school Edhec‘s Risk and Asset Management Research Centre. According to Giraud’s research, managed accounts could erase 85% of the risks, most of which are traced to misappropriation, misrepresentation or trading outside of operating mandates.
According to Edhec: “Managed account platforms offer a level of protection that allow[s] the fund of hedge funds manager, or the final investor, to focus investments and efforts on the asset allocation and manager selection phases of the investment process.” The study identifies governance – specifically the absence of independent oversight – as “the most important element to be considered” before investing in hedge funds. The school says it commissioned the study to support Edhec’s decision to collaborate with managed account providers to develop investable indices. The outcome of the study convinced the school that “the benefits of managed account platforms clearly outweigh their costs and limitations.”