The billion‐dollar hedge fund fraud

Abstract

Explains the popularity of hedge funds as a convenient way to park pension fund and endowment fund money onshore or offshore in times of volatile stock and bond markets; as a result, hedge fund assets have risen to almost $650 billion. Relates this to why they are vulnerable to scams: they are largely unregulated and operate in secrecy, as the proprietary investment strategies of the manager cannot be revealed because of the added value they bring to the fund. Asks where the auditors were in cases of abuse, and gives examples of billion dollar frauds. Recommends measures to minimise risk of hedge fund fraud: put managers and staff under scrutiny for criminal convictions, perform due diligence and background tests, ensure proper audits, and meet with current fund clients.

Citation

Gregoriou, G.N. and Kelting, W. (2004), "The billion‐dollar hedge fund fraud", Journal of Financial Crime, Vol. 12 No. 2, pp. 172-177. https://doi.org/10.1108/13590790510624909