Jerome Lussan, CEO of Laven Partners, appeared on Thomson Reuters’ Insider on Friday 27 August, commenting on the reasons why some investors prefer to invest in new hedge fund managers and the importance of operational due diligence in this respect.
Jerome pointed out that several investors have been dissatisfied with past hedge funds’ structures and strategies, and in particular since the 2008 crisis, and that this has directed them towards new talent in the hope to increase their returns.
Jerome said that investors are increasingly aware that operations, meaning the team and the firm’s structure, lead to the long-term success of investment strategies. Although many of the most successful new managers come from the biggest investment banks and hedge funds, Laven’s extensive experience in operational due diligence has repeatedly shown the added value of due diligence to ensure solid operations and discipline are in place. A new manager will be exposed to a new environment and may not be as successful as when surrounded by colleagues at a proprietary trading desk in a bank. Access to information may also be limited once a new manager is away from the bank’s trading floor.
Investors should also understand that by investing in new talents, they are putting their money into a small firm and they must also focus on other team members just as if making an investment into a private company rather than just the trader, to make sure the firm’s business is run efficiently.
To view the full interview, please click here.
