In the wake of the Madoff scandal, the pressure for tougher
due diligence from hedge fund investors has intensified
dramatically. Faced with more demanding and concerned
investors, leading hedge fund groups have been grappling with
ways to demonstrate that their businesses - unlike Madoff - are
indeed honest and above board, have appropriate controls in
place, comply with rules and regulations, and truly generate
the returns the managers are reporting.
Now it seems that one particular process - a US auditing
procedure called a Statement on Auditing Standard 70 (generally
referred to as a SAS70) - is starting to gain traction as a key
method for some of the biggest hedge fund groups to demonstrate
that they have a robust and verifiable control environment.
At our recent Absolute Return Symposium in New York,
Millennium Partners founder Israel Englander referred in
particular to a so-called 'Type 1' SAS70 as one of several key