Lawyers and investigators predict that due to the recent hedge fund scandals, most recently the collapse of Bayou Management and the suspected fraud at Wood River Capital Management, investors are more likely to take precaution before entering into the industry, Reuters reports.

It is now possible to hire a firm to investigate a hedge fund company, for fees ranging between $2,000 and $50,000. "Getting reports on managers shows that for $2,000 up front, you can avoid people like this instead of having to spend hundreds of times that amount to recoup millions of dollars in losses later," said Randy Shain, executive vice president at First Advantage CoreFacts, which investigates hedge funds. "Its cheap insurance," he added.

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