LONDON (Reuters) – The risk that hedge funds will defraud investors is lower in Europe than in the United States, because most European hedge funds turn to independent administrators to value their books, hedge fund analysts said.
A lack of independent valuations contributed to the high-profile failure earlier this year of the U.S.-based Bayou Group hedge fund. Its founder and chief executive pleaded guilty to fraud by misrepresenting the value of assets, in a scheme prosecutors said cost investors $450 million.
“You should be wary of self-administered funds … That’s where the danger is,” said Derek Stewart, a director of Mellon Global Alternative Investments.
