The sound practices for the administration and operations of
a fund of funds are as important as those for the investment
teams. Internally, there should be an appropriate segregation
of duties between investment teams and the risk
management/operational staff and procedures should be set up to
ensure that service providers are acting in the best interests
of the fund of funds.
The use of an independent administrator offers both
investors and the fund of funds many benefits. Other duties
that need to be considered include: trade processing and
settlement, cash management and control, pricing of portfolios,
net asset valuations, maintenance of appropriate information
systems and service provider oversight.
Trade processing can be complex and a fund of hedge funds
should ensure that the administrator has adequate internal
controls to properly identify and record detailed information
on all transactions between investors and the FoHF. Procedures
for dealing with the notification...