Industry Updates

PwC: Hedge fund infrastructure critical to addressing regulatory and business requirements

Monday, June 20, 2011

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Opalesque Industry Update – A new study by consulting firm PricewaterhouseCoopers reports that hedge fund infrastructure is crucial in addressing regulatory and business requirements, particularly in the light of the implementation of new rules, including the Dodd-Frank Act, the Alternative Investment Fund Managers Directive and the Foreign Account Tax Compliance Act.

In its paper entitled, ”Infrastructure: from cost to benefit – hedge funds 2.0”, PwC provides an insight into the correlation between the new regulatory regime and the financial crisis, and also takes a look into the necessary adjustments needed by individual hedge fund strategies to meet the challenges set by the new rules. Hedge funds can also take advantage and actually reap some benefits from the new regulations, the paper added

Mike Greenstein, global alternatives leader at PwC, commented, “Investors look for the ‘right’ kind of risk in their portfolios; they’re not looking to expose themselves to reputational or operational threats. Senior management wants to insulate their organizations from damage to credibility and brand so things that may not have been the focus of a firm’s infrastructure a few years ago have become critical in the face of the double threat of investor activism and regulatory change.”

Other key factors that are putting more pressures on hedge funds to change their operations are the demand from investors for greater due diligence and transparency.

But more importantly, hedge funds are finding it necessary to adopt the best available technology as they now acknowledge the need to expand their talent as many of the traditional methods available in the past are no longer suitable.

Greenstein added: “The industry has always been resource constrained but we’re now seeing top performers with compliance, tax and valuation skills in ever greater demand. Those with credible risk, legal, finance and investor relations expertise are also highly sought after. In Europe, base salaries for experienced compliance staff have doubled in recent years as hedge funds compete for resources in a limited talent pool. Investing now and ring-fencing key talent will pay off.”
Komfie Manalo

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