The Hedge Fund Law Report

The definitive source of actionable intelligence on hedge fund law and regulation

Articles By Topic

By Topic: Chief Risk Officers

  • From Vol. 8 No.2 (Jan. 15, 2015)

    Coherence Capital Partners Hires John Lovisolo as COO and CRO

    Coherence Capital Partners LLC, a New York-based asset manager and advisory firm focused on the fixed income markets, recently announced the hire of John Lovisolo as Member, Chief Operating Officer and Chief Risk Officer.  See  “Ernst & Young Survey Shows Risk Managers Possess Tremendous Influence and Face Substantial Challenges in the Asset Management Industry,” The Hedge Fund Law Report, Vol. 5, No. 23 (Jun. 8, 2012); “What Is a Chief Risk Officer, and Should Hedge Fund Managers Have One?,” The Hedge Fund Law Report, Vol. 2, No. 31 (Aug. 5, 2009).

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  • From Vol. 7 No.15 (Apr. 18, 2014)

    Best Practices for Hedge Fund Separate Account Risk Management

    The Asset Management Group of the Securities Industry and Financial Markets Association (whose members include hedge funds and private equity funds) recently asked its members and other notable asset managers to respond to a survey about separate accounts that they manage.  Among other things, the survey asked respondents to detail their risk management processes and the nature of their approaches toward monitoring counterparty and other risks for separate accounts.  The survey report provides detail on how the surveyed firms monitor counterparty risk for separate accounts; risk metrics typically measured and monitored on an ongoing basis in the course of management of separate accounts by the surveyed firms; and risk management processes (other than counterparty risk management) the surveyed firms typically employ in the management of separate accounts.  This article describes the survey process and the survey findings, focusing in particular on the findings related to risk management for separate accounts.  The survey findings are relevant to hedge fund managers that manage separate accounts in crafting or refining their risk management systems with respect to such accounts.  See also “BNY Mellon Study Identifies Best Risk Management Practices for Hedge Fund Managers,” The Hedge Fund Law Report, Vol. 5, No. 37 (Sep. 27, 2012).

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  • From Vol. 5 No.37 (Sep. 27, 2012)

    BNY Mellon Study Identifies Best Risk Management Practices for Hedge Fund Managers

    In the last few years, hedge fund managers, investors and regulators have identified a growing roster of risks facing hedge fund investments and operations.  See, “SEC Provides Recommendations for Establishing an Effective Risk Management Program for Hedge Fund Managers at Its Compliance Outreach Program Seminar,” The Hedge Fund Law Report, Vol. 5, No. 4 (Apr. 5, 2012).  As a consequence, investors and regulators are increasingly demanding effective, appropriately tailored risk management systems, and managers are making an ongoing effort to divine best practices.  Recognizing and reflecting this trend, BNY Mellon issued a research study in August 2012 that provides a roadmap of the state of risk management in the hedge fund industry, risk management trends and best practices.  This article summarizes the key points from the study, with particular emphasis on tools and practices hedge fund managers can implement to identify, monitor, mitigate and report on risk.  See also “Ernst & Young Survey Shows Risk Managers Possess Tremendous Influence and Face Substantial Challenges in the Asset Management Industry,” The Hedge Fund Law Report, Vol. 5, No. 23 (Jun. 8, 2012).

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  • From Vol. 5 No.23 (Jun. 8, 2012)

    Ernst & Young Survey Shows Risk Managers Possess Tremendous Influence and Face Substantial Challenges in the Asset Management Industry

    Hedge fund investors and regulators are intensely focused on fund managers’ risk management functions.  Investors conduct extensive due diligence to ascertain how managers are addressing various investment, operational and compliance risks confronting the managers’ businesses.  Regulators are mandating that fund managers provide voluminous information about the risks their funds face through disclosures such as Form PF.  See “Form PF: Operational Challenges and Strategic, Regulatory and Investor-Related Implications for Hedge Fund Managers,” The Hedge Fund Law Report, Vol. 5, No. 4 (Jan. 26, 2012).  As such, a firm grasp of risk management is imperative for hedge fund managers seeking institutional investment and credibility with regulators.  In that vein, in May 2012, Ernst & Young released its 2012 survey report entitled, “A growing sphere of influence – survey of U.S. asset management risk managers” (Report).  The Report provides market color with relevance to hedge fund managers on how the broader asset management industry is approaching risk management.  The Report describes risk managers’ views on their level of influence within their firms; their mandates; their biggest challenges; the top risks they face; their risk monitoring responsibilities; the frequency of risk reporting they provide; future risk management initiatives; their awareness of budgets; use of key risk metrics; and hybrid risk management organizations.  This article summarizes key findings contained in the Report.  See also “What Is a Chief Risk Officer, and Should Hedge Fund Managers Have One?,” The Hedge Fund Law Report, Vol. 2, No. 31 (Aug. 5, 2009).

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  • From Vol. 2 No.31 (Aug. 5, 2009)

    What Is a Chief Risk Officer, and Should Hedge Fund Managers Have One?

    “In the wake of the financial crisis, risk governance has emerged as a key topic,” and “[a]t no time in history has there been a greater need for companies to evaluate and strengthen risk governance.”  These statements, from the executive summary of a recent survey conducted by Capital Market Risk Advisors (CMRA) and the Professional Risk Managers’ International Association (PRMIA), reflect the perception of risk shared by many hedge fund managers, in the broader economy and on Capitol Hill.  That survey, titled “Risk Governance: A Benchmarking Survey” (Survey) analyzes, among other things, the role of Chief Risk Officers (CROs) at various types of financial institutions, including hedge funds.  According to the Survey, only about 50 percent of institutional investors have a CRO and hedge fund boards are less likely than boards of other types of institutions to have executive sessions with the CRO.  Many hedge fund managers do not have a CRO at all, which means that the substantive functions of the CRO are performed by someone else (e.g., the Chief Operating Office (COO), Chief Compliance Office (CCO) or portfolio manager), or are not performed at all.  In either case, the Survey and sources interviewed by The Hedge Fund Law Report concurred that there is value in localizing various risk management functions in one person – both in protecting against downside and in identifying areas for upside.  Broadly, a CRO serving in a consultative role, as opposed to merely a control role (we explore the difference in greater detail in this article), can help the fund manager identify underappreciated areas of risk, or areas where risk has been overstated.  A CRO can add value in risk avoidance and risk appreciation.  This article details the substance of a CRO’s typical role at a hedge fund manager; reporting procedures; control versus strategic roles for CROs; trend and exception reports; CRO compensation; and the likelihood that Congress or a regulator will require hedge funds to have CROs or someone performing their substantive functions.

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