• Industry: Financial Services, Investment Management, Private Equity, Real Estate
  • Type: Survey report
  • Date: 10/11/2013

Exploring the cost of compliance 

Exploring the cost
The industry has spent much time talking about compliance around the world. Yet there is scant data to properly compare and correlate the true cost – in resources, time and money – of the different regulatory requirements. This report aims to fill that gap and delivers a unique view into how much funds and managers are investing based on which regulations they must comply with.

While our survey did not include every hedge fund manager around the world, the data suggests that, as an industry, hedge funds are spending more than USD2.98 billion on regulatory compliance, including technology, headcount and third-party vendors.

In particular, respondents noted the high costs of AIFMD authorization and reporting. Almost half (46 percent) of all respondents impacted by AIFMD rated the cost of compliance as ‘high’ and a further third (33 percent) rated it as ‘medium’.

SEC registration and reporting was identified as the second most costly regulatory requirement to comply with: more than four in ten (42 percent) of those who have registered or are in the process of registering with the SEC deem compliance costs to be ‘high’ with only slightly fewer (40 percent) characterizing their costs as ‘medium’.

Other regulatory requirements are soaking up even more time. More than 20 percent of those required to complete the SEC’s Form PF said they spent more than 500 hours preparing and filing their initial submission; nine percent said they spent a similar amount of time registering with the CFTC/NFA; and seven percent of those registered with an Asia-Pacific regulator said they also spent more than 500 hours preparing and registering under their requirements.

On the positive side, the addition of new resources and sharpening of focus on regulatory compliance and risk management suggests that hedge fund managers around the world are committed to ensuring that they meet not only the high regulatory burden, but also the heightened demands of their institutional investors.


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