President’s Working Group Hedge Fund Report – Interactive Version

Hedge Fund Regulation 15 Apr 2008

As you are likely aware by now, the Asset Manager and Investor Committees of the President’s Working Group on Financial Markets released their long awaited hedge fund guidelines yesterday (Asset Managers’ Committee report, Investors’ Committee report). 

The Asset Managers’ report contains a lot of material that hedge fund managers will recognize from their existing “due diligence questionnaires” – staple fare for institutional sales.  

But according to the text, the “bar is being raised”:

“We believe this Report raises the bar for the industry by providing strong and clear guidance to managers for strengthening their practices in ways that investors demand and the markets require, while also providing managers with appropriate flexibility to continue to innovate and grow. By adopting these practices, hedge funds will strengthen infrastructure and risk management practices that can help them more effectively manage market events or financial crises that may arise.”

The big question now seems to be “will hedge funds adopt the recommendations?”  The report leaves little doubt that its proposals are guidelines only.  In fact, the word “should” appears 245 times in the report, while the word “must” appears only 11 times.  Interestingly, the word “should” is followed by “consider” 18 times, “include” 12 times and “establish” 11 times.

You are likely now wondering what kind of losers stay up until 10 pm counting word occurrences in documents like this.  That’s okay.  So would we – if we hadn’t come across this nifty little program from IBM that counts word occurrences and displays them graphically (hat tip to the organizers of the O’Reilly Money:Tech conference in February).  We uploaded a TXT version of the document and IBM handled the rest.  Here’s a sample of what we got (see below to quickly and easily create the same charts yourself):



Now that the data has been uploaded, anyone can go right to the file and do a search for any word they choose.  Give it a try if you have a few minutes to kill today.  If you click on any of the words immediately to the right of your keyword, that branch expand to display the subsequent branches in greater clarity.  Very cool.  Although we admit to not really knowing what to do with the information…not unlike hedge fund transparency, we guess.  (By the way, “transparency” makes zero appearances in the document.)

Disclaimer: We converted the 27,000 word PDF into a txt file and uploaded it to the IBM website.  We did not confirm that the upload was 100% accurate and did not manually count each word to see if this thing does what it says it does.  But it seems to us to have worked okay.  Feedback welcome. 

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