Industry Surveys

Global Hedge Fund COOs Spending More Time Addressing Regulatory Issues - Survey

Eliane Chavagnon Deputy Editor - Family Wealth Report 11 October 2013

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Almost a quarter of US hedge fund chief operating officers
have seen a rise of up to 75 per cent in the amount of time they dedicate to legal,
compliance and regulatory issues, a new survey shows.

Globally, a COO’s time spent on legal and regulatory matters
has increased up to 50 per cent more for the majority of managers surveyed in Deutsche Bank’s Hedge Fund Consulting Group survey of European and US
hedge fund managers.

Deutsche Bank said the regional difference is most likely attributed
to the fact that US
managers had to prepare for SEC and CFTC registration and reporting before
their European counterparts were required to comply with the Alternative
Investment Fund Manager Directive. (The AIFMD is a measure designed to tighten
regulation of vehicles such as hedge funds, requiring more detailed reporting,
due diligence, while also creating a “passport” system for such funds in the
EU.)

The survey also suggests that hedge funds are taking a “wait-and-see
approach” to compliance with the AIFMD, as 82 per cent of European managers
intend to delay registration until 2014.

In other findings, marketing to European investors continues
with 35 per cent of managers in Europe and 43 per cent in the US choosing to use transitional marketing
provisions. Meanwhile, half of managers said they have decided to respond only
to incoming investor requests for information regarding their funds until they
have further clarity on marketing to Europe under
AIFMD.

In July, the SEC adopted a new rule to
implement a JOBS Act requirement which involves lifting the ban on
general solicitation or general advertising for certain private
securities offerings.

According to the latest HFR Market Microstructure Industry Report, 288 hedge funds launched in this year's second quarter, down
slightly from the 297 established in Q1 but up from 245 a year ago. 

“The easing of marketing restrictions on hedge funds
constitutes an important milestone in the progression of alternative
investments becoming more accessible to a wider pool of investors and expanding
mainstream awareness of the hedge fund industry,” said Kenneth Heinz, president
of Hedge Fund Research.

The survey polled 44 European and US hedge fund managers
representing over $325 billion in assets under management.

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