Institutional investors driving hedge fund transparency: State Street

Institutional investors are driving the use of third-party administrators in the hedge fund industry in a bid to increase transparency and operational control, according to the latest Vision report from State Street.

The report, titled Hedge Funds: Rebuilding on a New Foundation, found that as hedge fund assets under management return to record levels after the global financial crisis, investors are seeking to change the way funds are run.

George Sullivan, head of State Street’s alternative investment solutions group, said institutional investors are increasingly taking greater interest in how hedge funds manage operational infrastructure, choose administrators and provide for governance and best practices.

The report said this meant the use of third-party administration and risk management has gone from a “nice to have” to become a critical market differentiator.

“By hiring administrators to assume a range of services, including data management, asset class coverage and portfolio risk analysis, fund managers can concentrate on generating alpha and distributing investment products,” Sullivan said.