Hedge fund raters’ rating is only ‘fair’ – they could do better

Hedge fund investors want some comfort that they will not be entrusting their money to shady characters and, given that the regulatory environment does not offer any such assurance, a rating system for hedge funds is without doubt a decent idea.

In an ideal world, this oversight would be provided by funds of hedge funds or by the banks that evaluate hedge fund managers for credit. Sadly, though, a few funds of hedge funds are beginning to tarnish the credibility of the investment vehicle as a provider of high-quality due diligence.