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Risk Management and Valuation Practices in the Global Hedge Fund Industry

Precautions that pay off


As hedge funds grow in size and complexity, risk management and valuation practices are becoming increasingly important for hedge fund advisers, investors and regulators. Yet, very little data exist on the actual risk management practices of hedge fund advisers.

This makes it difficult for both investors and for hedge fund advisers to answer some basic questions. What are prevailing hedge fund valuation and risk management practices? How do they compare with the industry’s best practices? What should investors watch out for? What steps can hedge fund advisers take to better meet, and anticipate, the expectations of investors in the marketplace?

To help bridge this gap, Deloitte Research conducted a survey of the valuation and risk management practices of 60 hedge fund advisers from across the globe.  The survey results provide benchmarks for a variety of risk management and valuation metrics. They also show a disparity of practices. In general, the findings show that while many of the basics are in place, improvement still needs to be made.

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