Corgentum’s Consulting’s operational due diligence webinar series was recently featured in the Hedge Fund Law Report .

The first webinar in the series, Operational Due Diligence Survival Kit for 2012: Essential skills for uncovering and evaluating operational risk in hedge funds, private equity and traditional funds, outlined key trends for investors to consider when performing operational due diligence.  The Hedge Fund Law Report article, “Corgentum Webinar Highlights Trends, Challenges and Best Practices for Hedge Fund Investors in Conducting Operational Due Diligence” can be read on the Hedge Fund Law Report
website (subscription required) in Vol. 5, No. 16 (Apr. 19, 2012).

Corgentum has also recently posted a replay of the webinar on the Videos section of Corgentum.com. .

Readers can sign up for news related to upcoming Corgentum webinars focused on operational due diligence via the firm’s Contact page.

Click here to discuss this post.

Permalink.

• 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.

Click here to discuss this post.

Permalink

Michael Spak, one of the three partners in the fund, reported Zuck to the FBI. He said that the situation was currently under investigation. Osiris was started in 2009 and Spak told FINalternatives, “The fund is a ‘hedged’ fund in the truest sense of the word. Our team’s objective is to immunize the volatility of the portfolio which in turn allows us to produce better than average returns consistently.”

Interestingly enough, according to Bloomberg data, the fund ranked third out of 3,527 top performing global hedge funds in April 2010. Since the start of the investigation, no money has been recovered and Zuck is nowhere to be found.

It was announced that Zuck was arrested in 1995 and spent over a year in jail for “misconduct by a corporate official.” Hedge fund operational due diligence would have revealed these public records as well as identified any other questionable aspects of the fund to investors. Investors should be wary of investing in a fund without performing any bit of ops dd because fraud is much more common than we think…

Click here to discuss this post.

Permalink

A hedge fund manager for FrontPoint Partners was sentenced to five years in prison on Friday, November 18th. Joseph Skowron pled guilty in the summer of 2011 to insider trading which resulted in Morgan Stanley avoiding $30 million in trading losses. According to the New York Times, Skowron enticed French doctor,  Yves Benhamou, to give him “confidential results about clinical drug trials.” In addition to selling HGSI Human Genome Sciences stock before the news of its downfall was made public, Skowron and Benhamou agreed to deceive the Securities and Exchange Commission (SEC) by withholding information from them regarding their endeavors. Dr. Benhamou also pled guilty to charges he was brought up on, and will be sentenced next month.

Here is a video about the arrest:

Because Skowron obtained access to material non-public information and took advantage of it to benefit himself, he caused many people to lose their jobs and money. Although it is possible to receive non-public information legally, it is what you choose to do with that information that can become a potential problem. In the case of Skowron, not only did he go searching for insider information, but he also acted upon the information he received. It was the action he chose to take, that led him down the path he is now traveling. Ironically, Chip, as he is referred to in the industry, made Galleon Group one of his victims. Galleon Group was the hedge fund managed by Raj Rajaratnam, who was sentenced to 11 years in prison for insider trading not long ago. The charges that surrounded Skowron destroyed FrontPoint, which was one of the most prestigious firms on Wall Street. Skowron is forced to pay $8 million in forfeiture and fines to the government.

This is a perfect example of the need for operational due diligence firms. A simple list of investigative procedures, if properly executed, could have prevented Skowron, and several others, from committing this white-collar crime. By conducting a comprehensive review of a hedge funds’ exposure to, operational strengths and weaknesses regarding the hedge fund manager, and a hedge fund’s exposure to material nonpublic information, it will decrease the chance of insider trading as well as other operational risks. It is with due diligence that we can identify any below-the-surface issues within a fund, and find out about people like Skowron, so that investors can make more informed decisions before investing.

Click here to discuss this post

Permalink

The recent comments of Jason Scharfman, Corgentum Consulting Managing Partner regarding the enhanced focus being placed by investors on hedge fund operational risk were outlined in Risk.net’s Operational Risk & Regulation Journal in an article entitled, Operational infrastructure at hedge funds comes under closer scrutiny .

Topics outlined by Mr. Scharfman in the article include:

• Continued failures of many hedge fund with in regards to documenting operational policies
• Benefits of hedge funds emphasizing their operational strengths and openly discussing operational weaknesses
• The false artifical operational floor of Dodd-Frank legislation
• Inherent benefits of investors develop dialogues concerning operational risks with their hedge fund managers

The full article can be read on the Risk.net’s Operational Risk & Regulation website (subscription required).

Click here to discuss this post.

Permalink.

From some recent media coverage… “Former Société Générale chief Daniel Bouton, who resigned amid intense criticism just over a year ago, branded Kerviel “a terrorist” at the time. But Kerviel quickly became a romantic underdog – a clever anti-hero seen to be caught in the massive cogs of finance, who was only trying to do his job. T-shirts around Paris read, “I am Jerome’s girlfriend,” and he wrote a tell-all book, published last month.”

His book is called L’engrenage, Mémoires d’un trader . Kerviel even had a graphic novel comic book made about his escapades (Le Journal De Jérôme Kerviel).

Here is a video about Kerviel back in court:

Here is an interview from French television (in French) with Kerviel:

But I think these British puppets might describe the whole rogue trader situation the best:

Or perhaps this sums it up more succinctly:

Click here to discuss this post.

Permalink.

This paper outlines, the benefits to investors of developing and maintaining competency of global operational risk trends. While an absolute best practice standard facilitates uniformity in comparing operational risk information, this methodology can suffer from rigidity.

A floating standard can better accommodate the particularities of hedge funds operating in different regions but runs the risk of being overly flexible.

Hedge Fund Operatinal Due Diligence: An Absolute or Floating Standard? can be found in the Research section of the www.corgentum.com website, or via direct link here .

Click here to discuss this post.

Permalink.

Click here to discuss this post.

Permalink.

1) the demand for operational due diligence seems to be global in nature (i.e. – USA, Asia and Europe);

2) direct hedge fund operational due diligence experience is (foolishly) not always required, but rather an industry qualification is sufficient in some cases;

3) based on some job descriptions it is clear that certain operational due diligence functions will be understaffed to performed a thorough operational due diligence review;

4) In certain other cases, the operational due diligence position may be part of a larger role which will require the operational due diligence analyst to both perform due diligence and oversee other internal operational processes

In short, based on the continued apparent misperception among certain hedge fund allocation groups as to the time and effort required to perform operational due diligence, I would highly encourage all those seeking an operational due diligence role to perform some sort of due diligence on your potential employer to ensure they actually understand the appropriate effort required to thoroughly perform operational due diligence on a hedge fund.  If not,  an under resourced and overworked operational due diligence analyst may find themselves serving as a scapegoat in the event a hedge fund failure occurs (a fund which they may not have had the opportunity to thoroughly vet). Here’s a video about scapegoating:

Some recent links to some operational due diligence jobs are posted below. As I stated in the previous post, I do not know if these positions have been filled and I do not vouch for or endorse any of these positions. Now with all of this hokum out of the way I thought this list might be of interest to some of this website’s readers:

Operational Due Diligence Researcher (Seattle, Washington, USA)

Hedge Fund Due Diligence Analyst (New York, New York, USA)

Operational Due Diligence Associate (New York, New York, USA)

Director, Operational Due Diligence (New York, New York, USA)

Operational Due Diligence Analyst (London, United Kingdom)

Head of Operational Due Diligence (United Arab Emirates)

Click here to discuss this post.

Permalink.

For more information or to enroll in this course please visit the course details homepage.

Click here to discuss this post.

Permalink.