Hedge funds are adopting a wait-and-see approach to compliance with regulation due to the complexity of workload involved, Deutsche Bank's latest study shows. At the same time, legal, compliance and regulatory matters now rank as the top contributor to their non-investment workload, the study showed.
According to Deutsche Bank's Hedge Fund Consulting Group's survey of European and US hedge fund managers, almost a quarter of US hedge fund COOs have seen an increase of up to 75% in the amount of time they dedicate to such issues. At the same time, hedge funds are taking a wait-and-see approach to compliance with the Alternative Investment Fund Manager Directive (AIFMD), with 82% of European managers intending to delay registration until 2014.
Further highlights of the survey include:
• Marketing to European investors continues with 35% of European and 43% of US managers choosing to utilise transitional marketing provisions. • The amount of time COOs globally dedicate to legal, compliance and regulatory matters has increased significantly - by up to 50% - over the past two years for the majority of managers surveyed. • The majority of managers globally estimate their non-headcount related costs have increased by up to 25% over the last two years. • More than 40% of managers have hired more than one non-investment full-time employee to help prepare for and manage new regulatory requirements. • 39% of managers are uncertain whether AIFMD will bring additional investment from institutional investors.
Daniel Caplan, European head of Global Prime Finance at Deutsche Bank, said: "The crucial role played by hedge fund COOs has been brought into sharp focus as the regulatory workload continues to mount, and this report provides a valuable insight into how this function has evolved to meet today's increasingly complex demands." The survey polled 44 European and US hedge fund managers representing over $325bn in assets under management.