The graph below is from a survey conducted in 2009 by Ernst & Young named Global Hedge Fund Survey: Weathering the storm published in November 2009. It is not a surprise that the 100 hedge funds surveyed prefer an investor driven change rather than a costly and efficiently questionable regulation.
I agree that investors should be more demanding from their hedge fund managers in terms of transparency. However, the only way for the industry to be effectively "policed" by its investors is to lower the cost of information.
In a paper, Board Structure and Price Informativeness, forthcoming in the Journal of Financial Economics, The authors find evidence that stock market monitoring is a substitute for board monitoring. Access to reliable information at a reasonable cost is what makes it possible.
The day when investors will be able to compare hedge funds on an apple to apple basis, the industry will be a safer place to invest.
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