Funds Facing Greater Capital Raise Scrutiny

Multiple sources are reporting that there is far more scrutiny for Hedge Funds and other types of asset classes or blind pools. We expect the overall time periods for raising capital from new sources to lengthen as institutions, family offices and high net worth individuals are providing greater inspection which requires more time. Likewise, many institutions have cut back on the number of staff reviewing deals so as to reduce the total number of allocations and variety of allocations to new sources.

Kinetic Partners on the Finalternatives web site lists several red flags for the viability of a fund as:

• Lack of or Weak Valuation Policy

• Substantial Change in Assets Under Management

• Personnel Concerns

• Establishment of Side Pocket Investments

• Strategy/Style Drift

• Change in Leverage Amount

• Counterparty Concentration

• Unknown or Affiliated Service Providers

• Outdated Legal Documents

• Matching of Fund Liquidity vis-a-vis Underlying Portfolio Liquidity

• Lack of Supervisory or Best Practices Policies and Procedures

• Inability to Communicate Processes Clearly and Thoroughly