Hedge Fund Due Diligence at Leman Alternative Asset Management Company

15 Pages Posted: 30 May 2017

See all articles by Pedro Matos

Pedro Matos

University of Virginia - Darden School of Business; European Corporate Governance Institute (ECGI)

Abstract

In early January 2008, a senior VP with LAAMCO, a fund of hedge funds known for alternative investments, was conducting due diligence on an equity market-neutral hedge fund. The hedge fund used an option strategy known as a collar (also known as a bull spread or split-strike conversion). The track record of the hedge fund had been stellar. The fund's performance had not only beaten that of the S&P 500 Index over the same period but had done so with much lower monthly return volatility. As part of the due diligence, it was necessary to backtest the collar strategy and try to quantify how much value the manager, BLM Investment Securities, LLC, (BLM) had added. The case is a disguised representation of an actual hedge fund—the true identity of BLM is revealed to students at the end of the case discussion.

Excerpt

UVA-F-1698

Jun. 21, 2013

HEDGE FUND DUE DILIGENCE AT

LEMAN ALTERNATIVE ASSET MANAGEMENT COMPANY

It was early January 2008 in Geneva, Switzerland, and the day looked as though it might turn snowy. Thierry Michaud's office window offered a view of Lake Leman and, in the background, white-capped Mont Blanc. A storm was forming above the lake, and the view of the Alps was disappearing.

Michaud was a senior VP with Leman Alternative Asset Management Company (LAAMCO), a fund of hedge funds known for alternative investments. LAAMCO had a research-driven approach to constructing diversified portfolios of hedge funds for investors and utilized advanced risk analytics to monitor the portfolios. The company had close ties with major private Swiss banks that invested money for high-net-worth Europeans. Michaud was the team specialist looking at U.S. equity market-neutral hedge funds. These funds had both long and short positions on U.S. stocks and options to maintain a market-neutral position.

. . .

Keywords: hedge funds, hedging, investing

Suggested Citation

Matos, Pedro, Hedge Fund Due Diligence at Leman Alternative Asset Management Company. Darden Case No. UVA-F-1698. Available at SSRN: https://ssrn.com/abstract=2974510

Pedro Matos (Contact Author)

University of Virginia - Darden School of Business ( email )

University of Virginia
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434 243 8998 (Phone)
434 924 0726 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty-research/directory/pedro-matos/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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