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Know What Communication to Expect from Your Hedge Fund Manager

The partnership agreement you sign with your hedge fund manager probably will cover what kind of communication the hedge fund manager wants to arrange and how often he’ll make contact.

If you feel like you have to have regular, face-to-face meetings with the hedge fund manager you associate with, make sure a manager is amenable to this request before you commit your money.

Even if he isn’t big on face-to-face communication, your hedge fund manager should offer you these written reports:

  • Quarterly report: This report should explain the fund’s investment performance to date, giving you a sense of where the returns are relative to the appropriate investment benchmarks and letting you know how the market outlook suits the fund’s strategy.

  • Annual report: Once a year, your fund manager should give you a comprehensive report on the fund’s performance, including the total value of the assets under management and the total fees charged. An outside auditor should prepare this report — not the hedge fund manager.

    Make sure of this before you sign up. You probably won’t get a comprehensive list of holdings, but you should get enough information on industry and asset classes to get a sense of the fund’s overall risk-and-return profile, which helps you evaluate how the fund’s performance fits your portfolio needs.

You should read through a prospective fund’s report archives before you invest to discover more about the fund’s investment style and communication philosophy.

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