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Alternative Market Briefing

Other Voices: Not your father's hedge fund industry

Friday, March 23, 2012

Authored by Matt Nelson, Executive Director, Strategy at Omgeo LLC, a financial operations expert, this article looks at the consequences of pending regulations on the hedge fund industry.

Much of discussion on the regulatory changes facing the financial industry in 2012 and beyond has focused on high profile topics such as systemic risk, bank capital and OTC derivatives. Not only are these topics interesting to the masses, they’re also where regulators and the public have pointed their fingers when handing out blame for the crisis.

What many may not realize is that these global regulations, including Dodd-Frank in the US and EMIR and the AIFMD in Europe, will also have a profound and wide-reaching impact on hedge funds and the unintended consequences on this industry may be severe.

As an example, I was recently speaking to someone who works at a sizeable hedge fund who informed me the firm has recently decided to return their investors’ money. Among their reasons are the daily challenges of dealing with global regulations, demanding clients and difficult markets. I suspect that this firm is not alone and that many firms are following or considering a similar path.

Although the US markets are performing well, several Asian and European markets are struggling and globally, investor confidence is shaky at best. But as hedge funds are opportunistic and depending on their investment s......................

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