SEC examiners are finding some hedge fund advisors are allocating profitable trades and investment opportunities to proprietary funds rather than client accounts, she said.
Hedge fund advisors may be shifting expenses away from themselves to funds and portfolio companies by charging a fund for the salaries of the advisor’s employees or hiring the advisor’s former employees as “consultants” paid by the funds, White said, adding that fund advisors are collecting millions of dollars in accelerated monitoring fees without disclosing the practice.
—Ted Knutson