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Bailey McCann, Opalesque New York:

The operational cost of running a hedge fund is coming into focus for managers and investors in the wake of MiFID II. The regulation will require managers to be more transparent about the cost of doing business, which could put even more pressure on fees and expenses. At Context Las Vegas, allocators noted that managers will have to provide clear justifications for all fees.

"We think the next five years are not going to be about performance fees, instead the fight is going to be about how much it costs to run the business," said David Saunders, Founding Managing Director and Co-Founder at K2 Advisors from the stage. "One example I would give is when we started in the '40 act space, mutual fund managers have a total expense ratio fee. They have to get that fee as low as possible. If you're coming from a hedge fund where that hasn't been the focus, it's work to get there."

Rules like MiFID II in Europe require that managers start paying for investment research in addition to providing investors with more transparency about what their money is paying for. Industry observers predict that the change which went into effect in January will give more market share over to large firms that can pay for research without passing costs onto investors. Smaller fund managers have started pooling their resources and joining research platforms to try and offset costs.

So far, the US has held off implementing a similar require......................

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