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Alternative Market Briefing

Hedge funds prioritize technical compliance over governance

Tuesday, December 04, 2012

Bailey McCann, Opalesque New York: 72% of hedge fund investors feel as though hedge funds are focused on achieving only the technical compliance, versus pursuing a culture of governance, when it comes to regulatory preparedness, according to a new survey from Corgentum Consulting, an independent provider of hedge fund operational due diligence reviews. Additionally, hedge fund investors in the study said that they felt like there was not enough transparency on compliance costs and how they are managed. 62% of investors felt that fund's ability to advance the cost of compliance was not fair. This suggests that investors are increasingly focused on such technical terms contained in fund offering memorandums as the scope of due diligence processes broadens.

The biggest hedge fund compliance risks investors worry about are ongoing concerns of insider trading violations (35%) and the perceived risks related to increased frequency of regulatory on-site visits (28%). Investors also expect a greater number of technical violations spurred by regulatorsí increasing interaction with funds. Nearly half of investors (43%) said they thought that these regulations wouldn't protect them.

"The post Dodd-Frank environment has brought increasingly complex technical requirements for hedge funds, such as the recent SEC registration requirements and Form PF filings," said Jason Scharfman, Managing Partner of Corgentum Consulting. "Investors are increasingly observing that fund ma......................

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