New York (HedgeCo.Net) – Hedge fund managers are making significant investments in their firms’ infrastructure to comply with new regulatory requirements, according to a new global survey. The average spend on compliance was at least $700,000 for small fund managers, $6 million for medium-size fund managers, and $14 million for large fund managers.
The survey, “The Cost of Compliance,” was conducted by the Alternative Investment Management Association (AIMA), the Managed Funds Association (MFA) and KPMG International, between May and August of this year and includes the views of 200 hedge fund managers representing more than $910 billion in assets under management (AUM). It also included in-depth interviews with managers from North America, Europe and Asia.
The study found that the hedge fund industry has already invested heavily in compliance efforts to meet new global regulations, having spent more than $3 billion to date on compliance costs. Hedge fund managers were found to be spending anywhere between 5% and upwards of 10% of their operating costs on compliance technology, headcount and strategy.
“This study demonstrates our industry’s tremendous commitment to a new era of regulation. In supporting the goals of global financial reform, and reinforcing that support with these investments in compliance, the industry has acted as a willing partner with regulators and policy makers in creating safer, more stable, and efficient markets for investors,” said Richard H. Baker, President and CEO of Managed Funds Association.
More than two-thirds of the respondents said they needed outside help with AIFMD authorization and reporting; 65% needed help with FATCA; 63% needed help with their SEC registration and reporting; and 62% needed external help with their US Commodity Futures Trading Commission (CFTC) registration and reporting. By comparison, less than 25% of respondents said they needed outside help with Asia Pacific registration and reporting.
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