Hedge funds finding regulation tougher than asset growth

Published on 29 Jun, 2016

Managing regulation cited as number one challenge by hedge funds

Keeping up with regulation has become equal to the challenge that asset growth poses for hedge funds, according to a report by analyst house Aranca and financial services tech firm FIS.

Half of the 258 hedge fund professionals polled ranked growing assets under management and keeping pace with legislation as top three concerns.

In Europe and Asia Pacific keeping on top of the pace of regulation was the number one challenge (cited by 61% and 47%).

In the US, fee pressures were the highest concern (49%) followed by growing AuM (48%) and keeping pace with regulatory change.

“Many hedge funds launched on the basis of a good trading idea or team, with a lighter operational burden making them nimbler than they would have been if they were running the strategy on a bank’s prop desk,” says Trevor Headley, head of product management, boutique asset management for FIS's asset management business.

“However that is changing. The responsibilities that fund manager’s face these days are considerable.”

The pressure is rising from investors too, Headley notes. In the study, investors thought that fee pressures (76%), staying ahead of the competition (48%) and finding new opportunities (46%) were the industry’s top three problems, a result supported by the level of investor withdrawal from the sector.

Yet, surprisingly, operational and technology issues were not a major concern for the fund managers. 

"Most are aware that they have the potential to automate and scale up using technology in order to overcome the challenges they face, particularly in their need to collate and report data," Headley explains.

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