Hedge funds solve the risk culture puzzle

As recent reverses amply demonstrate, risks beyond investment risk can cause even the most sophisticated hedge funds to take a battering. Navroz Patel finds out about leading managers' greatest fears, and how they are tackling thorny issues such as valuation and counterparty risk.

Little more than year ago, Clinton Group in New York was one of the most sought after hedge fund managers, but investor sentiment quickly soured. By the end of 2003, total assets under management had dwindled by more than 60% – due mostly to redemptions – to just over $2 billion.

The group has been struggling to halt the haemorrhage of investor capital ever since, despite investigations by auditors and regulators finding no evidence of impropriety. The well-reported valuation dispute that

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