Corgentum Consulting Releases Hedge Fund Newsletter: Operational Due Diligence Insights
Corgentum Consulting has today released the first issue of its new operational due diligence newsletter entitled, Operational Due Diligence Insights. This newsletter will bring investors unique operational due diligence news and insights . Topics covered in this issue include:
- How will SEC registration influence investor due diligence on hedge funds?
- Tools for investors to evaluate financial statement risk
- Considerations when analyzing administrator independence in the valuation process
- Diagnosing information security risks
This newsletter will be available on Corgentum Consulting’s website via direct link here.
Operational Due Diligence Insights also includes a section about Corgentum’s upcoming events like their new webinar: Operational Due Diligence Survival Kit for 2012. This webinar will be on March 15 from 2-3 pm EST and will give attendees vital information to asses and uncover operational risk in hedge funds, private equity and traditional funds. Click here to signup for the upcoming webinar.
Readers can also visit Corgentum’s contact page to sign up to receive future issues as well as other Corgentum news and upcoming events.
Corgentum to moderate: The Changing Landscape of Alternative Investments and what opportunities lie ahead?
Corgentum Consutling Managing Partner Jason Scharfman, will moderate a panel at the upcoming Opal 
Investments Consultants Forum entitled, “The Changing Landscape of Alternative Investments and what opportunities lie ahead?”
Mr. Scharfman will address topics including the increasing resources being dedicated towards due diligence, the evolving nature of operational due diligence and the effect of the global recession on due diligence.
The conference will take place on March 11, 2010 at the Princeton Club of New York .
For more information regarding the conference or to register please visit Opal’s website.
Weavering Capital’s Downfall: A novel idea – trade with yourself
MARCH 23, 2009
The liquidation of Weavering Capital was recently announced. Weavering is a small but established British hedge fund manager which was established in 1988. The $639 million London based hedge fund has called in PricewaterhouseCoopers to liquidate the fund.
Weavering is likely going to be investigated by the UK’s Serious Fraud Office,which is part of the criminal justice system, as well as UK regulators including the Financial Services Authority.
It is rumored that Weavering’s downfall was a series of interest-rate swap deals between Weavering in the Cayman Islands and a British Virgin Islands based company which just so happened to be controlled by Weaving’s chief executive, Magnus Peterson, the former head of trading for Skandinaviska Enskilda Banken (SEB), a Swedish bank.
PwC said it had been told the BVI company’s assets were $10m of cash and $40m of private equity positions. It is unclear who the directors of the BVI company are, but PwC said on Thursday night that Mr. Peterson had told them he controlled it.
Mr. Peterson, his wife Amanda, James Stewart (a frequent TV commentator) and Chas Dabhia (Chief Operating Officer) were on the board of the UK company. Mr. Peterson’s stepfather and brother were directors of the Cayman fund revealed as the counterparty to the trades. The Mayfair (a UK hedge fund center) based fund’s research director is James Stewart, an economic commentator who has made regular television appearances.
As the Madoff scandal has demonstrated in abundantly clear detail the presence of a significant amount of family members, be they on the board of a hedge fund, or actually working on a daily basis at a hedge fund organization should raise a significant red flag during the due diligence process. This is not to say that the presence of any such family relationship should preclude in and of itself investing in an organization such as Weavering, but it should heighten levels of scrutiny of other things such as independence. A second, often-overlooked issue, during the hedge fund operational due diligence process is thoroughly investigating affiliated and/or related entities as well as their board members. In this case many, investors clearly missed this step.
The primary problem in Weavering’s case was that the main counterparty in the interest-rate swap was essentially controlled by itself (despite the legal fiction of different entities in different jurisdictions). It seems that once the firm was hit with a wave a redemption requests all at once, Weavering notified investors that it was “urgently” investigating the position. It should have been a fairly short investigation – since it was looking into itself.
