List of 10 Hedge Fund Risks

I was alerted to an interesting article written by Stuart Fieldhouse and Hans-Olov Bornemann of SEB Asset Management.  They listed the 10 mistakes to avoid with hedge fund managers.  They are:

• Fraud / misrepresentation - stealing from investors, assigning high valuations to illiquid assets
• Operational risk - counterparty risk, NAV calculations, key personnel leaving
• Concentration risk - too many assets in one sector, country or asset class
• Leverage - net and gross
• Liquidity risk - not being able to sell assets when needed
• Funding risk - mismatching borrowing and asset maturity dates
• Too many assets under management - not all managers can handle an increase in money
• Copycats - other managers following the same strategy
• Being front run - other funds trading ahead of a large fund
• Forced unwinding - funds may be forced to sell assets to make margin calls and client redemptions