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20 Jan 2009

Independent Hedge Fund Management Key to Investor Trust

The recent wave of scandal related to hedge funds and funds of funds has made investors think twice about investing in self-administrated funds, see 'Andrew Schneider on Nadel Funds'.

Dermot Butler, Chairman of alternative fund administrator, Custom House Group, said, “In today’s new investment environment, more than ever hedge funds and funds-of-funds must have independent outside administrators as a foundation to help rebuild investor confidence and attract new investment capital.”

Fund administrators, such as the $35 billion Custom House Group, provide a range of services to funds and fund-of-funds including (but not limited to), fund accounting, portfolio valuation, NAV calculation and shareholder services as well as anti-money laundering services and reconciliation services and record-keeping functions.

“In anything less than an independent fund administration relationship, there is at the very least a perception that a conflict of interest may exist that could prevent objective verification of a fund’s investment activities and even the existence of underlying assets in a given fund, let alone an objective and accurate valuation of the fund's assets,” Butler said. “This perceived conflict may occur when an outside administrator is affiliated with a financial institution, with an investment manager, or when the administrator is associated with a hedge fund itself.”

“As stand-alone companies, independent administrators have no affiliations to any outside financial entities, et ergo, no such conflicts exist,” he concluded.

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