This presentation, “Hedge Funds and Current Securities Litigation,” will focus on key issues and potential analyses in various types of litigation involving hedge funds. We will begin by providing an informational overview of hedge funds, including a review of defining features and challenges unique to these investment vehicles, as well as the different classifications of hedge funds. We will then provide a brief context on the dramatic growth in both the number of these funds and in their assets under management over the past decade. We will also discuss some of the trends affecting the evolution of the hedge funds industry and setting the stage for new potential developments in regulation, pricing, reporting, and management.
We will then examine some of the major concerns that have arisen relative to hedge funds, such as their performance relative to other investments and to their fees, and to the difficulty of measuring performance over time, and will refer to several well-known studies on the controversial topic of “hedge fund alpha.” We will conclude this first part of the presentation by examining the current regulatory environment for hedge funds.
Next, we will turn to issues in hedge fund litigation, beginning with a discussion of the complex relationships among key parties – the prime brokers, investors, auditors, and hedge funds, and we “follow the money” through a set of hypothetical trades. The rest of the presentation will take us through a detailed examination of specific kinds of hedge funds cases, including investor-focused litigation (Madoff-related matters), trading and market manipulation, including insider trading, late trading/market timing, conflict of interest cases, and cases involving prime brokers. For each of these examples, we will present potential analytical approaches to assessing issues related to liability and damages.