Rimon’s Mark Diamond quoted in the Hedge Fund Law Report on Performance Advertising
News Mark Diamond · December 05, 2013
The Hedge Fund Law Report quoted Rimon's partner Mark Diamond for his view on the effects of clawback and backtesting in determining gross results for use in performance advertising. The October 25, 2013 article is entitled "Can Hedge Fund Managers Use Gross (Rather Than Net) Results in Performance Advertising?"
Mark Diamond noted that:
“The effect of a clawback is negative on the fees; so, it’s positive on the performance. I would advise a private equity fund manager to include in a footnote that it was assumed there would be no clawback. That shows a more conservative view of performance than if you tried to estimate what a clawback might be.”
“If you are internally managing assets where you do not take out management fees, but you want to use that as part of your performance disclosure, you have to come up with a pro forma management fee for the relevant period. When managers do backtesting, they set up a model to see how it performs. Then the manager may decide to go with that data to help raise money from investors for an actual fund. As long as the manager discloses how it came up with the performance data used and that the figures were based on model fees, the manager’s conduct should fall within the scope of the J.P. Morgan Investment Management no-action letter.”