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Alternative Market Briefing

Majority of fund managers moving to high complexity operational and business models are hedge funds

Wednesday, April 26, 2017

Komfie Manalo, Opalesque Asia:

A survey by alternative investment data provider Convergence showed that alternative asset managers saw an increase in "complexity" during the first quarter of 2017, with 152 managers, or 2%, moving to a High Complexity Profile in their operational and business model.

The increase in complexity was led by hedge funds, with 78 funds moving to High Complexity, compared to 34 private equity funds, 10 real estate funds, and 28 "other category", the survey showed.

"The quarter saw movements up and down the complexity curve across all fund types, and we expect to see continued changes as 225 new Managers were added, based on our most recent view of Q1 data," said John Phinney, co-president at Convergence.

Convergence assesses manager risk by tracking and monitoring 40 business and operational factors, including internal valuation, self-administration, and qualified audits. Convergence data has demonstrated a strong historical correlation between growth in fund complexity and levels of alternative manager risk.

The study also found that new regulatory actions disclosed by alternative managers during Q1 increased by 135, comprised of 120 Regulatory Actions, eight civil actions and seven criminal actions.

A total of 121 managers experienced a decline in Complexity from High to Medium Complexity, led by 39 hedge fund managers, 44 private equity managers, 12 real estate managers and 57 other fund managers. Some 225 new managers were ......................

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