A new report from CPA firm Rothstein Kass, service provider to the alternative investment industry, is called “A New Regime: The Regulatory Climate for Hedge Funds.” The research aims at investigation of sector trends in hedge fund industry under new presidential administration. Overwhelming majority expects new period to be rather negative due to increased regulation of the hedge funds leading to augmentation of compliance costs.
The research is based on the survey conducted by Russ Alan Prince, a authority and counselor on private wealth, and Hannah Shaw Grove, finance expert. Categorising firms according assets under management the researchers interviewed on the phone 313 hedge fund Senior Partners at US hedge fund organizations.
Slightly over 70 % of the participants reported assets under management between $100 million and $750 million. Nearly 30 % of firms reported assets under management in excess of $750 million.
The areas where respondents expect increased regulation are:
-Asset valuation – 84%
-Counterparty Risk – 84%
-Capital Raising – 80.8%
-Transparency – 77.3%
Under half of participants indicated that increased regulation would impact capital raising efforts and approximately 84% consider restricted regulatory compliance to result in more costly hedge fund operation.
The majority of hedge fund managers believe that increased compliance regulations wont impede fund launches or accelerate closures.
“Though hedge fund managers readily acknowledge that a more restrictive regulatory environment looms, the industry seems well-positioned to meet the demands of increased compliance, says Howard Altman, co-managing principal, Rothstein Kass. Despite the fact that nearly 84 % of participants believe that compliance costs will make funds more costly to operate, fewer than seven percent expect that this will lead to increased costs to investors,”
The election’s focus on the economy left many with the impression that regulatory reform will be a priority for the new regime, continues Howard Altman. While the scope of these efforts is not yet defined, it is apparent that the hedge fund industry believes that regulatory action is on the horizon.
L.D.