Pension Risk Matters : Pension Risk News & Analysis : Investment Governance, Inc. : Pension Risk & Investment

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For those who don't know, RiskCenter.com has recently started broadcasting interviews with risk management professionals. I had the pleasure of being interviewed a week ago about a few of the many steps that pension funds can take to assess hedge fund risk. Clearly, in just a few minutes, it's impossible to provide more than a few soundbites. However, allow me to reiterate one point.

Before plunking down monies to invest in a hedge fund or fund of funds, ask to meet with the risk manager and request a copy of their risk management policy. If the fund has no official risk manager, ask to meet the person who assumes functional duties (if not the title). If the fund tells you that their risk management policy is proprietary, ask for a general description of risk controls and the system of oversight. If you still get push back, think about your comfort level if something goes awry and you are asked why you invested anyhow, even though your request for information was rejected. (Even if information is provided to you, you may want to assess whether the information is "enough.")

Some may assert that the Private Placement Memorandum (PPM) is sufficient. See for yourself. In my view, the PPM often addresses risk in overly broad and vague terms, certainly not enough to give a pension investor any meaningful amount of information about the risk management process.

If you would like to see the short interview, go to www.riskcenter.com and click on the relevant video. If you would like more information about hedge fund risk and valuation issues, contact us at PG-Info@pensiongovernance.com. We will be uploading information next week to www.pensiongovernance.com about a forthcoming series of webinars we call the Hedge Fund Toolbox^SM. Our series of webinars known as the Private Equity Toolbox^SM is already in the works. We have a spectacular line-up of speakers.

P.S. These comments do not reflect investment, legal or governance advice. Readers still need to meet with their counsel about their fiduciary responsibilities as regards hedge fund investing.