The SEC filed three enforcement actions against hedge funds resulting from its “Aberrational Performance Inquiry,” which uses “proprietary risk analytics” to evaluate hedge fund returns. According to the SEC, the Enforcement Division’s Asset Management Unit seeks to identify performance “that appears inconsistent with a fund’s investment strategy or other benchmarks” and commence further scrutiny.  Robert Khuzami, the SEC’s Director of Enforcement, said that the initiative is designed to earlier detect and prevent securities law violations.  The underlying complaints involve overstating performance, exaggerating qualifications, manipulating the valuation process, and undisclosed conflicts of interest.