On October 6, Financial Times published an article about how hedge funds' managers use expenses claims to cover travel by private jet and other luxury items directly through the funds they manage. This relatively short piece of news has sparked a heated debate.
The funds have reportedly served to cover inter alia salaries, marketing, travel and entertainment expenses – and all of that legally, as the forms through which the expenses have to be claimed allow for a broad variety of charges. With these charges being passed on to investors, it should come as no surprise that returns on investments remain underwhelming to say the least. The funds they manage. This relatively short piece of news has sparked a heated debate.
But is this a problem? Not for everyone. “Some allocators to hedge funds said they were willing to invest in the worst offenders if their performance was sufficiently good,” reports Financial Times. If the manager thinks the expense in question is to the advantage of the funds, it is justified, reasons the devil’s advocate.
Financial Times returned to the topic of private jets 20 days after they published the original article: “In a day and age where airlines offer an affordable and comfortable means of access to all corners of the world, with phone and internet connectivity, there can be very few situations where chartering a jet is really necessary.” They argue that squandering hedge fund managers are likely to antagonize their clients. As wealthy as they themselves might be, wasteful treatment of their money is not something they like to see. However, since individuals who invest in hedge funds value their privacy, they are unlikely to publicly demand more transparency.