Regulatory impetus includes the SEC registration requirements in the US (Dodd Frank), the Alternative Investment Fund Managers Directive (AIMFD) and the Foreign Account Tax Compliance Act (FATCA). These pressures, combined with greater investor due diligence and demands for transparency, are forcing hedge funds to change the way they operate. Investors and regulators want to see reliable policies and controls in place across the hedge fund value chain. Areas of scrutiny include: valuation policies and procedures; safekeeping and controls surrounding funds’ assets; trading policies and procedures, including ethical guidelines; and compliance policies supporting multiple regulatory demands. Beyond improving processes and formalising controls, hedge funds are also finding that their talent needs are broadening while many technology platforms are not fit for purpose.
Having the right people, processes and technology is fast becoming a prerequisite for hedge fund growth, and the publication entitled 'Infrastructure: from cost to benefit – hedge funds 2.0’ examines the impact of the crisis on the industry and outlines what all parts of the hedge fund value chain need to do to satisfy regulatory demands and capitalise on growth opportunities.