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Goltz, Felix; Schröder, David --- "Hedge Fund Reporting" [2012] ELECD 241; in Athanassiou, Phoebus (ed), "Research Handbook on Hedge Funds, Private Equity and Alternative Investments" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on Hedge Funds, Private Equity and Alternative Investments

Editor(s): Athanassiou, Phoebus

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849802789

Section: Chapter 6

Section Title: Hedge Fund Reporting

Author(s): Goltz, Felix; Schröder, David

Number of pages: 25

Extract:

6. Hedge fund reporting
Felix Goltz and David Schröder* 104




INTRODUCTION
Hedge funds employ dynamic investment strategies and enjoy a high
degree of freedom with regard to the instruments that they can hold in
their portfolio. In addition, they can use short selling of securities and
leverage. Consequently, alternative strategies are infinitely more complex
than those of traditional funds. The complexity of hedge fund invest-
ments poses a challenge when it comes to an adequate and comprehensive
hedge fund reporting. Although some of the key elements of hedge fund
returns can easily be captured by appropriate indicators, other aspects
are much more of a qualitative nature, and are thus more difficult to
formalize.
This chapter serves as theoretical background to the question of appro-
priate hedge fund reporting practices. We outline the major challenges for
hedge fund reporting and give an overview of the set of tools that is avail-
able to report the performance and risk of hedge fund investments. This
chapter is divided in four sections. Section 1 demonstrates the importance
and the challenges of hedge fund reporting, the regulation framework, as
well as guidelines issued by governmental working groups and industry
associations. Section 2 looks at the performance and risk measures used in
hedge fund reporting. Although some of the standard measures are widely
employed in practice, they are not always suitable from a theoretical
standpoint. Section 3 examines specific issues that are of importance for
hedge fund disclosure, such as leverage, liquidity, and operational risk. ...