Why hedge fund managers are hesitant to talk with reporters

Nell Mackenzie, a hedge fund reporter at Reuters, spoke on the “Hedge Fund Huddle” podcast about covering the industry and the difficulties in getting fund managers to talk.

Here is an excerpt:

Nell: I think part of the friction we run up to with the free speech that hedge funds could or would have, if they so choose, is that they face two legal regimes which prevent them from talking freely, particularly in the US. And that includes if they have US clients. So, forgive my legal nerdery, but in anticipation of this podcast, I spoke to a couple of lawyers. And the biggest requirement a hedge fund faces is a fiduciary duty to their investors. So, if they, for example, talk about a trade and say, hey, I’m long yen short the dollar, right? There is a chance that other hedge funds could either pile onto that trade or could try to ruin it by front running it or getting in there before, during, or after the trade or create other trades that would change the market impact of that trade. And then if the hedge fund went big and was like, yay, yay, yay, advertise that currency trade, then that hedge fund would be breaking their responsibility to the investor because if the trade was in any way broken, then that would cost the investor money because the hedge fund performance would go down. So, always hedge funds legally are thinking about their fiduciary duties to their investors.

Read more here. MacKenzie also explains the difference between “off the record” in New York and in London.