Information asymmetry danger discussed at Lyxor funds conference

Interaction between the fund management industry and academics from around the world has been enhanced by Lyxor Asset Management’s Research conference, which draws out the best contemporary studies on hedge funds.

Academia is often accused of being, at best, removed and, at worst, irrelevant to the harsh realities of the financial world. But a conference backed by Lyxor Asset Management is providing an acclaimed channel for debate and discussion between theorists and practitioners.

The financial crisis has prompted investors and ­managers to probe the structures and functioning of their industry as never before. Fresh analysis from the world’s most prestigious academic institutions is ­providing evidence of the unintended consequences of some ­long-standing practices.

This year, Lyxor’s fourth annual Hedge Fund Research Conference, held in conjunction with NYSE Euronext in Paris, attracted more than 300 delegates from universities around the world.

An organising committee headed by Serge Darolles (pictured), head of research at Lyxor and CREST, along with EDHEC Business School’s Rene Garcia and Christian Gourieroux of the University of Toronto, screened about 90 ­submissions from 50 universities in 15 countries to select the 19 unpublished papers presented to the conference.

Critical Thinking

In a unique format, the event allows highly topical ­p­re-published academic research to be critiqued by peers and industry professionals in open session. Among the participating academics this year were Ronnie Sadka of Boston College, George Aragon of Arizona State University and Marie Lambert of Maastricht University.

Among the subjects scrutinised included the “information asymmetry” in the industry, where research indicated that protections introduced to support the common interest of investors can lead to a potential conflict of interest between investment managers and their clients.

Among those discussing the papers were Jose Miguel Gaspar from ESSEC, Fulvio Pegoraro from Banque de France and Francesco Franzoni from the University of Lugano, as well as academics from ESCP Paris, EDHEC, CREST and the universities of Amsterdam, Brussels, ­Cambridge and Orleans.

Another paper on this theme suggested that hedge fund managers who delay voluntary disclosure of fund ­performance to public databases “introduce ­information asymmetries between managers and investors”. Specifically, funds which delayed reporting were found more likely to revise data, and having once revised, were more likely to revise again.

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