Practical Operational Due Diligence on Hedge Funds: Processes, Procedures, and Case Studies

A Comprehensive Reference for Due Diligence Professionals

Rajiv Jaitly is a veteran hedge fund operational due diligence and risk practitioner who was responsible for creating what was at the time one of the largest original independent operational due diligence teams reviewing operational risk on hedge funds. Not only does he have a wealth of first–hand experience of the procedures and processes discussed, but he has also had to deal with the repercussions from issues identified by him on cases which have resulted in problems for the investment and where history has proved him right. What he learned as a result of these eye–opening experiences and what any investor should be on the lookout for now when considering putting money into a hedge fund is the essence of this important book. For those specifically tasked with performing due diligence, Practical Operational Due Diligence on Hedge Funds: Processes, Procedures, and Case Studies is a must–have reference.

The book is a veritable encyclopedia of information. With many years of experience as a due diligence professional and consultant, Jaitly not only offers a wealth of information on how to perform due diligence effectively and thoroughly, he also walks the reader through over 300 case studies of issues with hedge funds. You will see what went wrong, what should have rung alarm bells and what you need to understand and do in order to identify the operational risks of hedge fund investing.

In a world where the stakes are immensely high, where short cuts might be taken in the name of expediency, and where nothing may be quite what it seems, this practical and complete guide is essential reading.

Preface

Acknowledgments

About the Author

Part I: Processes and Procedures

Chapter 1

WHAT IS A HEDGE FUND?

THE CONCEPT OF ALTERNATIVE INVESTMENTS AND HEDGE FUNDS

THE ROLE OF A HEDGE FUND IN AN INVESTMENT PORTFOLIO

Chapter 2

DEFINING OPERATIONAL ISSUES

CLASSIFYING PROBLEMS AND FAILURES

FRAUD

INSOLVENCY & WINDING UP

INVESTMENT LOSSES OUTSIDE THE FUND S STATED VOLATILITY RANGE

OPERATIONAL PROBLEMS, FUND DEFAULTS AND MATERIAL BREACHES OF CONTRACT

REGULATORY INTERVENTION RESULTING IN A SETTLEMENT, FINE OR FUND CLOSURE

WHAT HAPPENS WHEN IT ALL GOES WRONG

Chapter 3

STRUCTURES FOR INVESTMENT IN ALTERNATIVES

THE RATIONALE FOR OFFSHORE FUNDS

A QUICK PRIMER ON FUND STRUCTURES

LIMITED COMPANIES

UNIT TRUSTS

PARTNERSHIPS

MANAGED ACCOUNTS

MASTER FEEDER AND MINI MASTER STRUCTURES

UMBRELLA STRUCTURES

UCITS

THE CHANGING LANDSCAPE AND THE IMPLICATIONS FOR INVESTORS

REGULATORY ARBITRAGE

Chapter 4

IS THE FUND FOR REAL?  ESTABLISHING THE BASICS

CONSTITUTIONAL DOCUMENTS

FUND CONTRACTS AND THE BASICS OF CONTRACT REVIEWS

SERVICE PROVIDERS TO THE FUND

MANAGER VISITS

BACKGROUND CHECKS

INITIAL QUESTIONNAIRES TO COMMENCE DUE DILIGENCE WORK

GENERIC RISKS IN DOCUMENTS AND CONTRACTS

Chapter 5

UNDERSTANDING FUND OPERATIONS & CONTROLS

INVESTMENT STRATEGIES AND WHAT THEY INVOLVE

OPERATIONAL STRUCTURES REQUIRED TO SUPPORT AN INVESTMENT STRATEGY

ESTABLISHING THE EXISTENCE OF CONTROLS

Chapter 6

GOVERNANCE – MANAGING RISK THROUGH A NON EXECUTIVE BOARD

INVESTOR NOMINATED DIRECTORS

MANAGING RISK AS A NON EXECUTIVE BOARD

Chapter 7

REPORTING TO MEMBERS AND STATUTORY REPORTING

STATUTORY REPORTING

FINANCIAL STATEMENTS

DESIGNING A TEMPLATE FOR REVIEWING FINANCIAL STATEMENTS

SHAREHOLDER VOTING – THE AUTOMATIC PROXY

INVESTOR REPORTING AND TRANSPARENCY

CONFLICTS OF INTEREST AND TRANSPARENCY

Chapter 8

THE CURSE OF LEVERAGE (FUND LIABILITIES)

WHO PROVIDES FINANCE

HOW IS FINANCING SECURED

HOW COLLATERAL CREATES FUND RISK

UNDERSTANDING DEFAULT CLAUSES AND COVENANTS

COLLATERAL MANAGEMENT AND THE CONCEPT OF MARGINING

REHYPOTHECATION

BLOW UPS DUE TO LEVERAGE

Chapter 9

FUND ASSETS

VALUATION CONCEPTS

DESIGNING PRINCIPLES FOR VALUATIONS

VALUATIONS FROM AN ACCOUNTING PERSPECTIVE

AIMA RECOMMENDATIONS

VALUING LEVEL 3 INVESTMENTS AND ILLIQUID INVESTMENTS

VALUATION TRICKS AND DISCREPANCIES INCLUDING ACCOUNTING & DEALING NAVs

LIQUIDITY

STYLE DRIFT

THE SIDE POCKET

REVIEWING DERIVATIVE TRANSACTIONS

BETTING THE HOUSE AND ITS CONTENTS

NAKED SHORTS AND OPTIONS

MONTHLY REPORTING AND WHAT IT MEANS

HEDGING CURRENCY RISK AND IMPLICATIONS FOR LIQUIDITY

REALISING FEES ON A FUND AND DEFERRALS

THE BASICS ON TAXATION OF HEDGE FUNDS

Chapter 10

FRAUD

PHANTOM FUNDS AND THEFT

PONZI SCHEMES

INTENTIONAL MISVALUATION

PREFERENTIAL TREATMENT

MISREPRESENTATION / MISREPORTING

THE NICK LEESON SYNDROME – ROGUE TRADERS

COVERING UP MISTAKES

Chapter 11

FEES – THE ESSENCE OF HEDGE FUNDS

FEES

HIGH WATER MARKS, HURDLES AND CLAW BACK PROVISIONS

WHAT DOES IT COST TO RUN A FUND?

CAN INVESTORS POSE A RISK TO THE SURVIVAL OF A FUND?

THE GATE

REDEMPTION TERMS AND LOCK UPS

FEES ON SIDE POCKETS AND ILLIQUIDS

THE CAPITAL BASE OF THE FUND

ALIGNING INTERESTS

ARRIVALS & DEPARTURES:  FUND DILUTION, REBALANCING & BOX MANAGEMENT

Chapter 12

REGULATORY ACTIONS, POLITICS AND MARKET CONFIDENCE

SEC COMPLAINTS AND THE IMPACT OF GOLDSTEIN

CHARACTERISTICS OF SUCCESSFUL COMPLAINTS AND DEFENCES

THE BASICS OF AN SEC COMPLAINT

INVESTIGATIONS BY THE UK FINANCIAL CONDUCT AUTHORITY

LARGE FINANCIAL SERVICES FIRMS vs SMALL FINANCIAL SERVICES FIRMS

MANAGING ELECTRONIC DISCOVERY

AIFMD

DEVELOPMENTS IN THE ASIA PACIFIC REGION

INVESTOR PROTECTION THROUGH REGULATION

IDENTIFYING FUTURE RISKS

Chapter 13

KEYMAN RISK, DISASTER RECOVERY AND BUSINESS CONTINUITY

DEPENDENCE ON THE FEW

THE HOUSE OF CARDS – DISASTER RECOVERY OR BUSINESS CONTINUITY

WHOSE INFORMATION IS IT ANYWAY?

INSURANCE

Chapter 14

NEGOTIATING TERMS & EXERCISING RIGHTS

THE SUBSCRIPTION DOCUMENT

THE NECESSITY FOR SIDE AGREEMENTS

THE IMPLICATIONS OF SIDE AGREEMENTS

THINGS TO CONSIDER

EXERCISING SHAREHOLDER RIGHTS

TAKING OVER THE MANAGEMENT OF THE FUND

EXITING OR REDEEMING FROM A FUND

Chapter 15

RISK RATINGS & SCORING

THE NEED FOR RISK RATINGS AND SCORING

SCORING – TEMPTATIONS AND DANGERS

RISK MAPPING AND SOX CONTROLS

A TEMPLATE FOR SCORING A HEDGE FUND

EXTERNAL RATING AGENCIES

OUTSOURCING DUE DILIGENCE BY FUNDS OF FUNDS AND INSTITUTIONS

Chapter 16

MARKETING TO INVESTORS

WHAT THE PROSPECTUS DOES NOT SAY

DOES OPERATIONAL RISK REALLY MATTER?

MARKETING AS A DIFFERENTIATING FACTOR

CAREER RISK MANAGEMENT

INVESTMENT SELECTION PROCESSES – THE DECEPTIVENESS OF THE POWER OF VETO AND OVER–RIDING CONTROLS

Part II: Case Studies

Chapter 17

CASE STUDIES PRE – 2000

FLESCHNER BECKER ASSOCIATES

D.E. SHAW & CO LP

ASKIN CAPITAL MANAGEMENT L.P

GUARENTE–HARRINGTON ASSOCIATES

HUBSHMAN MANAGEMENT CORP

INVESTOR OVERSEAS SERVICES LIMITED

LONG–TERM CAPITAL MANAGEMENT L.P.

NIEDERHOFFER INVESTMENTS INC / NCZ COMMODITIES INC

ODEY ASSET MANAGEMENT LTD

OMEGA ADVISORS INC

PHAROS CAPITAL MANAGEMENT LP

PIPER CAPITAL MANAGEMENT INC

STEADMAN SECURITY CORPORATION

STEINHARDT MANAGEMENT COMPANY INC

TAKARA ASSET MANAGEMENT CORPORATION

Chapter 18

CASE STUDIES 2000

ASHBURY CAPITAL MANAGEMENT LLC

LASER ADVISERS INC

MANHATTAN CAPITAL MANAGEMENT, INC

MARICOPA INTERNATIONAL INVESTMENT CORPORATION

PENTA INVESTMENT ADVISERS LTD

SOROS FUND MANAGEMENT LLC

TIGER MANAGEMENT CORP.

Chapter 19

CASE STUDIES 2001

E THOMAS JUNG AND E THOMAS JUNG PARTNERS LTD

MARQUE MILLENNIUM GROUP, INC.

Chapter 20

CASE STUDIES 2002

BEACON HILL ASSET MANAGEMENT LLC

INTEGRAL INVESTMENT MANAGEMENT LP

KLESCH & CO LIMITED

ORCA FUNDS INC

TROUT TRADING MANAGEMENT COMPANY LTD

Chapter 21

CASE STUDIES 2003

CPTR LLC

CANARY INVESTMENT MANAGEMENT LLC

EIFUKU INVESTMENT MANAGEMENT LIMITED

HEARTLAND ADVISORS INC

J.T. INVESTMENT GROUP INC & NEW RESOURCE INVESTMENT GROUP INC

LANCER MANAGEMENT GROUP LLC AND LANCER MANAGEMENT GROUP II LLC

LIPPER HOLDINGS, LLC

MILLENNIUM CAPITAL GROUP LLC

Chapter 22

CASE STUDIES 2004

DOBBINS OFFSHORE CAPITAL LLC

FOUNTAINHEAD ASSET MANAGEMENT LLC

LF GLOBAL INVESTMENTS LLC

NEXTRA INVESTMENT MANAGEMENT SGR

Chapter 23

CASE STUDIES 2005

CREEDON KELLER & PARTNERS

AMAN CAPITAL MANAGEMENT Pte LTD

APPLEGATE INVESTMENTS

AMERINDO INVESTMENT ADVISORS INC

LAKE DOW CAPITAL, LLC

BAILEY COATES ASSET MANAGEMENT LLP

BAYOU MANAGEMENT LLC

AJR CAPITAL INC AND CENTURY MAXIM FUND INC.

DURUS CAPITAL MANAGEMENT LLC

ENTRUST CAPITAL MANAGEMENT INC

EPG CAPITAL MANAGEMENT INC

HMC INTERNATIONAL, LLC

K.L. GROUP LLC, KL FLORIDA LLC & KL TRIANGULUM MANAGEMENT LLC

HUNTER CAPITAL MANAGEMENT LP

LINUXOR ASSET MANAGEMENT LLC

LYCEUM CAPITAL LP

MARIN CAPITAL PARTNERS LLC

MILLENNIUM MANAGEMENT LLC

NORSHIELD ASSET MANAGEMENT (CANADA) LTD

PHILADELPHIA ALTERNATIVE ASSET MANAGEMENT COMPANY LLC

PHOENIX KAPITALDIENST GMBH

PIPPIN INVESTMENTS

PORTUS ALTERNATIVE ASSET MANAGEMENT INC

REFCO INC.

SPRINGER INVESTMENT MANAGEMENT INC

TENET ASSET MANAGEMENT LLC

MELHADO, FLYNN & ASSOCIATES INC

VERAS INVESTMENT PARTNERS LLC

WOOD RIVER CAPITAL MANAGEMENT LLC

Chapter 24

CASE STUDIES 2006

AMARANTH ADVISORS LLC

BENCHMARK ASSET MANAGEMENT – UK

CAPITALWORKS INVESTMENT PARTNERS, LLC

CMG–CAPITAL MANAGEMENT GROUP HOLDING COMPANY, LLC

DIRECTORS FINANCIAL GROUP LTD

ENDEAVOUR FUNDS MANAGEMENT LIMITED

GLOBAL CROWN CAPITAL LLC AND J&C GLOBAL SECURITIES INVESTMENTS LLC

GLG PARTNERS INC

INTERNATIONAL MANAGEMENT ASSOCIATES LLC

BRUMMER & PARTNERS

MANCHESTER TRADING LLC

MOTHERROCK LP

LANGLEY CAPITAL LLC

RCG CAPITAL ADVISORS LLC

SAMARITAN ASSET MANAGEMENT SERVICES INC

SEAFORTH MERIDIAN ADVISORS LLC

PLUSFUNDS GROUP INC

SPINNER ASSET MANAGEMENT LLC

VIPER CAPITAL MANAGEMENT LLC AND COMPASS FUND MANAGEMENT LLC

Chapter 25

CASES STUDIES 2007

ABSOLUTE CAPITAL GROUP LTD

ABSOLUTE CAPITAL MANAGEMENT LTD

ARAGON CAPITAL MANAGEMENT LLC

AXA INVESTMENT MANAGERS INC

BASIS CAPITAL FUNDS MANAGEMENT LTD

BEACON ROCK CAPITAL, LLC

BEAR STEARNS ASSET MANAGEMENT INC

CAMBRIDGE PLACE INVESTMENT MANAGEMENT LLP

CHEYNE CAPITAL MANAGEMENT (UK) LLP

CLARION MANAGEMENT LLC

COOPER HILL PARTNERS LLC

DSJ INTERNATIONAL RESOURCES LTD (CHELSEY CAPITAL)

EVERCREST CAPITAL (PTY) LTD

FORSYTH PARTNERS LTD

BRADDOCK FINANCIAL CORPORATION

GERONIMO FINANCIAL ASSET MANAGEMENT LLC

GOLDLINK CAPITAL ASSET MANAGEMENT LIMITED

CARIBBEAN COMMODITIES LTD

HAIDAR CAPITAL MANAGEMENT LLC

LAKE SHORE ASSET MANAGEMENT LTD

LYDIA CAPITAL LLC

BEAR STEARNS & CO INC

MDL CAPITAL MANAGEMENT INC

MERCURIUS CAPITAL MANAGEMENT LIMITED

GOLDMAN SACHS GROUP INC

ODDO & CIE / ODDO ASSET MANAGEMENT

EIGER CAPITAL LIMITED

SACHSEN LB

BNP PARIBAS SA

PIRATE CAPITAL LLC

QUATTRO GLOBAL CAPITAL LLC

IKB CREDIT ASSET MANAGEMENT GMBH

RITCHIE CAPITAL MANAGEMENT LLC

RUBICON FUND MANAGEMENT LLP

SENTINEL MANAGEMENT GROUP INC

SOWOOD CAPITAL MANAGEMENT LP

STRATIX ASSET MANAGEMENT LLC

SYNAPSE INVESTMENT MANAGEMENT LLP

TPG–AXON CAPITAL MANAGEMENT LP

TRIBECA GLOBAL MANAGEMENT LLC

DILLON READ CAPITAL MANAGEMENT LLC

UBS SECURITIES LLC

UNION INVESTMENT ASSET MANAGEMENT HOLDING AG

UNITED CAPITAL MARKETS HOLDINGS INC

WHARTON ASSET MANAGEMENT GB LTD

Chapter 26

CASE STUDIES 2008

CITIGROUP GLOBAL MARKETS INC MAT/ASTA FUNDS

GABRIEL CAPITAL CORPORATION

BLUE RIVER ASSET MANAGEMENT LLC

BLUEBAY ASSET MANAGEMENT PLC

CARLYLE INVESTMENT MANAGEMENT LLC

CENTAURUS CAPITAL LTD

1861 CAPITAL MANAGEMENT LLC

ANDOR CAPITAL MANAGEMENT LLC

CERES CAPITAL PARTNERS LLC

CITADEL LLC

COADUM ADVISERS INC & MANSELL CAPITAL PARTNERS III LLC

CORNERSTONE QUANTITATIVE INVESTMENT GROUP INC

CITIGROUP CAPITAL MARKETS INC – CSO PARTNERS FUND

DALTON STRATEGIC PARTNERSHIP LLP

D.B. ZWIRN & CO. L.P.

DEEPHAVEN CAPITAL MANAGEMENT LLC AND KNIGHT CAPITAL GROUP

DRAKE CAPITAL MANAGEMENT LLC

DREIER LLP

ENDEAVOUR CAPITAL LLP

EPIC CAPITAL MANAGEMENT INC

DELTAONE CAPITAL PARTNERS CORP

CITIGROUP ALTERNATIVE INVESTMENTS LLC

FAIRFIELD GREENWICH ADVISORS LLC

FOCUS CAPITAL INVESTORS LLC

FORTRESS INVESTMENT GROUP LLC

FRONT STREET CAPITAL CORPORATION

GLOBAL OPPORTUNITIES (GO) CAPITAL ASSET MANAGEMENT B.V.

BARCLAYS BANK PLC

GORDIAN KNOT LTD

GRADIENT CAPITAL PARTNERS LLP

HEADSTART ADVISERS LIMITED

HERITAGE WEALTH MANAGEMENT INC

HIGHLAND CAPITAL MANAGEMENT LP

ING (NZ) LIMITED

INSANA CAPITAL PARTNERS LP

LAHDE CAPITAL MANAGEMENT LLC

LAWRENCE ASSET MANAGEMENT LP

LIBERTYVIEW CAPITAL MANAGEMENT INC

LONDON DIVERSIFIED FUND MANAGEMENT LLP

UBS THIRD PARTY MANAGEMENT COMPANY S.A. AND ACCESS PARTNERS S.A.

TREMONT GROUP HOLDINGS INC

BERNARD L. MADOFF INVESTMENT SECURITIES LLC

KINGATE MANAGEMENT LTD

MANHASSET CAPITAL MANAGEMENT LLC

MAXAM CAPITAL MANAGEMENT LLC

MKM LONGBOAT CAPITAL ADVISORS LLP

MORGAN ASSET MANAGEMENT INC

OAK GROUP INC

OKUMUS CAPITAL LLC

CITIGROUP INC – OLD LANE PARTNERS LP

BANCO SANTANDER SA

ORE HILL PARTNERS LLC

OSPRAIE MANAGEMENT LLC

PARDUS CAPITAL MANAGEMENT LP

PARKCENTRAL CAPITAL MANAGEMENT LP

PELOTON PARTNERS LLP

PENTAGON CAPITAL MANAGEMENT PLC

PLATINUM GROVE ASSET MANAGEMENT LP

POLAR CAPITAL LLP

POLYGON INVESTMENT PARTNERS LLP

POWE CAPITAL MANAGEMENT LLP

QUANTEK ASSET MANAGEMENT LLC

REGAN & COMPANY

ROCKWATER MUNICIPAL ADVISORS LLC

DEUTSCHE BANK AG

RUMSON CAPITAL LLC

RUSSELL CAPITAL INC

WINDMILL MANAGEMENT LLC

SAILFISH CAPITAL PARTNERS LLC

SALIDA CAPITAL LP

SATELLITE ASSET MANAGEMENT LP

SEXTANT CAPITAL MANAGEMENT INC

STANDARD CHARTERED BANK PLC

STONE & YOUNGBERG LLC

GALLOWAY CAPITAL MANAGEMENT LLC

TANTALLON CAPITAL ADVISORS PTE LTD

TEQUESTA CAPITAL ADVISORS LP

TOSCAFUND ASSET MANAGEMENT LLP

JO HAMBRO CAPITAL MANAGEMENT LTD

TURNBERRY CAPITAL MANAGEMENT LP

FIRST REPUBLIC INVESTMENT MANAGEMENT INC

WEBB ASSET MANAGEMENT CANADA INC

Chapter 27

CASE STUDIES 2009

SCOOP MANAGEMENT INC & SCOOP CAPITAL LLC

ASENQUA INC

ASTARRA ASSET MANAGEMENT PTY LIMITED

ATTICUS CAPITAL

AUSTIN CAPITAL MANAGEMENT, LTD.

ACORN CAPITAL MANAGEMENT LLC

BOSTON PROVIDENT LP

CHAIS 1991 FAMILY TRUST

CEREBRUS CAPITAL MANAGEMENT LP

COHMAD SECURITIES CORPORATION

CRW MANAGEMENT LP

DYNAMIC DECISIONS CAPITAL MANAGEMENT LTD

EVERGREEN INVESTMENT MANAGEMENT COMPANY LLC

FINVEST ASSET MANAGEMENT LLC

GALLEON MANAGEMENT LP

HFV ASSET MANAGEMENT LP

JADIS INVESTMENTS LLC

JWM PARTNERS LLC

K1 FONDS GBR

LANCELOT INVESTMENT MANAGEMENT LLC

LOCKE CAPITAL MANAGEMENT INC.

LODGE CAPITAL GROUP LLC

M.A.G. CAPITAL LLC

NEW CASTLE FUNDS, LLC

NEW STAR ASSET MANAGEMENT GROUP PLC

NORTHERN RIVERS CAPITAL MANAGEMENT INC

NYLON CAPITAL LLP

NORTH HILLS MANAGEMENT LLC

ONYX CAPITAL LLC

CROSSROAD CAPITAL MANAGEMENT LLC

PEQUOT CAPITAL MANAGEMENT INC

PONTA NEGRA GROUP LLC

RAPTOR CAPITAL MANAGEMENT LP

RCS HEDGE FUND

RUDERMAN CAPITAL MANAGEMENT LLC

SAND DOLLAR INVESTING PARTNERS LLC

SNC ASSET MANAGEMENT INC

SOLARIS MANAGEMENT LLC

3V CAPITAL MANAGEMENT LLC

WEAVERING CAPITAL (UK) LTD

WEST END CAPITAL MANAGEMENT LLC & WEST END FINANCIAL ADVISORS LLC

WESTGATE CAPITAL MANAGEMENT LLC

WESTRIDGE CAPITAL MANAGEMENT INC

S2 CAPITAL MANAGEMENT LLC

Chapter 28

CASE STUDIES 2010

CAMULOS CAPITAL LP

DIAMONDBACK CAPITAL MANAGEMENT LLC

EASY EQUITY ASSET MANAGEMENT INC

EBULLIO CAPITAL MANAGEMENT LLP

FRONTPOINT PARTNERS LLC

GARTMORE GROUP PLC

GEM CAPITAL LLC

GLOBAL HOLDINGS LLC

GRIFPHON ASSET MANAGEMENT LLC AND SASQUATCH CAPITAL LLC

GSC GROUP INC AND J.P. MORGAN SECURITIES LLC

CHIMAY CAPITAL MANAGEMENT INC

HORSEMAN CAPITAL MANAGEMENT, L.P.

IMPERIUM INVESTMENT ADVISORS LLC

LANEXA MANAGEMENT LLC

LIFE S GOOD INC

ONYX CAPITAL ADVISORS LLC

PEF ADVISORS LLC

GARCIA CAPITAL MANAGEMENT LLC

GOLDMAN SACHS & CO

PLAINFIELD ASSET MANAGEMENT LLC

SOUTHRIDGE CAPITAL MANAGEMENT LLC

THINKSTRATEGY CAPITAL MANAGEMENT LLC / LILABOC LLC

COWEN GROUP INC

Chapter 29

CASE STUDIES 2011

AXA ROSENBERG INVESTMENT MANAGEMENT LLC

BARAI CAPITAL MANAGEMENT LP

BAYSTAR CAPITAL MANAGEMENT LLC

BENCHMARK ASSET MANAGERS LLC, AND HARVEST MANAGERS LLC

360 GLOBAL CAPITAL LLC

AETHRA ASSET MANAGEMENT B.V.

3 DEGREES ASSET MANAGEMENT PTE LTD

FLETCHER ASSET MANAGEMENT INC

DUMA CAPITAL MANAGEMENT LLC AND DUMA CAPITAL PARTNERS LLC

HARBINGER CAPITAL PARTNERS LLC

ALNBRI MANAGEMENT, LLC & MANAGED ACCOUNTS ASSET MANAGEMENT LLC

IU GROUP INC

JAMES CAIRD ASSET MANAGEMENT LLP

JUNO MOTHER EARTH ASSET MANAGEMENT LLC

KOMODO CAPITAL MANAGEMENT PTE LTD

LEADDOG CAPITAL MARKETS LLC

LIQUID CAPITAL MANAGEMENT, LLC

LOCUST OFFSHORE MANAGEMENT, LLC

LONGACRE FUND MANAGEMENT LLC

MICHAEL KENWOOD ASSET MANAGEMENT LLC

MILLENNIUM GLOBAL INVESTMENTS LTD

NEURAL MARKETS LLC

NEW CENTURY INVESTMENT MANAGEMENT LLC

O.S.S. CAPITAL MANAGEMENT LP

PAULSON & CO INC

PEGASUS INVESTMENT MANAGEMENT LLC

RAB CAPITAL LTD

SEATOWN HOLDINGS PTE

SHK ASSET MANAGEMENT LLC

SJK INVESTMENT MANAGEMENT LLC

SPENCER HOUSE CAPITAL MANAGEMENT LLP

TASK CAPITAL MANAGEMENT LLC, ARM CAPITAL MANAGEMENT LLC & VIGILANT CAPITAL MANAGEMENT LLC

TONTINE CAPITAL MANAGEMENT LLC

TRAFALGAR ASSET MANAGERS LIMITED

VANQUISH CAPITAL GROUP LLC

WCM CAPITAL INC

WESSEX ASSET MANAGEMENT LIMITED

Chapter 30

CASE STUDIES 2012

ABANTE CAPITAL (PROPRIETARY) LIMITED AND BASILEUS CAPITAL (PTY) LTD

TELL INVESTMENTS LLP

TIG ADVISORS LLC

TRADEWINDS GLOBAL INVESTORS LLC

VORAS CAPITAL MANAGEMENT LLC

BLUEGOLD CAPITAL MANAGEMENT LLP

THADDEUS CAPITAL MANAGEMENT (HK) LIMITED

BRICKELL FUND LLC

ALETHEIA RESEARCH AND MANAGEMENT INC

APPENDIX A

Index of Case Studies by Investment Manager

APPENDIX B

UK Serious Fraud Office Hedge Fund Investor Questionnaire

Index

RAJIV JAITLY is the managing partner at Jaitly LLP, a risk consultancy that provides independent risk, fund governance and operational due diligence services to global alternative investment clients. He set up and managed due diligence and investment management operations for the alternative investment asset businesses of major companies such as UBS, Santander and AXA. Jaitly has also advised the Regulatory Policy team of the U.K. Pensions Regulator, was appointed an expert by the UK Office of Fair Trading for its market study into the UK defined contributions pensions market and was commissioned by the UK Financial Services Consumer Panel to write a report on Fund Costs and their implications. He has also held appointments as a non–executive director of funds.