The Big 12: Best Practices for Hedge Funds

Managers who meet these Big 12 Best Practices and generate Alpha can seize the growth opportunities in the marketplace

  1. Written compliance and employee trading policies with periodic attestation
  2. Multiple levels of authority on cash movements with a minimum of two people controlling input, release, and approvals
  3. Written and consistent valuation policy by asset class
  4. Sound technology and infrastructure with reliable back-up, disaster recovery, and business continuity plan
  5. Open architecture to handle multiple prime brokers, multiple custodians, and managed accounts; understand why these firms are used and the alpha they generate
  6. Clear risk management methodology
  7. Ability to prove best execution
  8. High-quality audit, tax, and legal representation
  9. Sustainable third party administration with SAS 70 Type II
  10. Dedicated operations manager, COO, CFO, and CCO
  11. Significant principal’s money in the fund
  12. Daily position and cash reconciliation