The hedge fund industry is undergoing major changes to improve operational effectiveness, increase alignment of interests and deliver value to investors. The development of customized hedge fund products, such as managed accounts, is a key focus. A managed account gives the investor transparency on the underlying portfolio of investments, and the ability to take control of the portfolio from the hedge fund manager should it be required.
In a commingled fund or indirect investment, investors experienced the drawbacks of limited transparency in the underlying hedge fund holdings. Investors were exposed to the financial weakness or irrational redemption behavior of co-investors in the 2008 crisis. This led to demands from investors for greater transparency, liquidity and asset segregation, in order for them to better understand the investments hedge fund managers were making. It also led institutional investors to demand greater control over their hedge fund investments and that they not be subject to the liquidity provisions and co-investor risk of commingled structures.
This is different from a typical commingled hedge fund where the hedge fund manager owns the assets.