IDEAS home Printed from
   My bibliography  Save this article

Valuation issues and operational risk in hedge funds




In our recent study on the root causes of hedge fund failures, we identified a number of operational risk factors that together seem to account for approximately half of catastrophic cases. Issues related to valuation - the determination of fair-market value for all of the positions that make up a fund – underlie many of these operational risk factors. Recently, valuation problems have also been much in the news. These headlines suggest that the industry is not yet taking the steps needed to address problems in the valuation process. In fact, we believe that issues related to valuation of portfolios will likely become the next major 'black eye' for the hedge fund industry. Unless certain practices discussed in this paper become more widespread, we believe that hedge funds face a potential crisis of confidence with institutional and high net worth investors. Therefore, we are using this paper to consider the issues related to the valuation of hedge fund portfolios more closely, in particular as they pertain to the issue of managing operational risks associated with hedge fund investments.

Suggested Citation

  • Kundro, Christopher & Feffer, Stuart, 2004. "Valuation issues and operational risk in hedge funds," Journal of Financial Transformation, Capco Institute, vol. 10, pages 41-47.
  • Handle: RePEc:ris:jofitr:1343

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item


    Hedge funds; failures; operational risk;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:jofitr:1343. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Prof. Shahin Shojai). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.