BusinessWeek – The recent high-profile blowups of two hedge funds, Bayou Management and Wood River Capital Management, have raised an important question: What can hedge fund investors do to avoid getting burned by unscrupulous managers? The answer: Quite a bit, as long as you’re willing to spend time or money vetting these investments.
That’s not as hard as it may sound. As hedge funds have proliferated, so have resources for checking them out. For fees ranging from $1,000 to several thousand dollars, a growing number of hedge fund “sleuths” will conduct background checks on these secretive partnerships and their managers by searching for such red flags as bad credit histories and padded résumés. And thanks to the dissemination of information on the Internet, individual investors can tap into some of the same tools the professionals use. “There’s a lot more information available online now than there was just a few years ago,” says Jeffrey Brenner, principal at Intelysis, a Cherry Hill (N.J.) firm that does a booming business in hedge fund investigations.
