MFA and BNY Mellon Release Industry White Paper Focused on Hedge Funds and Risk Management

The MFA, in partnership with BNY Mellon and HedgeMark, announced the release of the white paper, "Risk Roadmap: Hedge Funds and Investors' Evolving Approach to Risk." The paper argues that fund managers have become less concerned with preserving the confidentiality of their investment strategies and more concerned with assuring investors that there are place strong measures to control risk (such that managers are willing to become more transparent to investors). The paper urges a variety of methods to improve risk management, including the development of an independent risk management function and the use of better risk analytics.

One part of the paper is a discussion of various types of risks that hedge funds may encounter, including those of a type not ordinarily discussed in papers on risk management (such as crowded trade risk), since most such papers are focused on banking entities, rather than investment entities.

Lofchie Comment: Although not primarily focused on legal issues, the paper is good reading even for lawyers. Among other things, the paper's discussion of risks should be useful for readers who wish to think through the content of disclosure documents.