3:16 pm - Monday January 21, 5309

Hedge Fund Industry – a stock taking

Internationally many regulations impacting operations of Hedge Fund industry cover the following major areas

–          Advertising

–          Broker Dealer Issues

–          Principal Underwriter Issues

–          Compliance

–          Derivatives

–          Disclosure

–          Enforcement Actions

–          Fees

–          Fixed Income Securities

–          Investment Advisors

–          Privacy

–          Tax Issues

–          Systemic Risk

–          Valuation

Hedge Fund industry was mainly concerned with the outcome of drafting of rules for implementation under Dodd Frank Act.

As an industry it also lobbied for favourable treatment.

Banks and asset managers scored some small victories after US Regulators narrowed the scope of a provision in the Volcker Rule under Dodd Frank Act that restricts banks’ ownership stake in hedge funds and private equity funds.

The final version of the Volcker Rule required by the 2010 Dodd Frank Wall Street reform law, strives to draw a much clearer line for what qualifies as a hedge fund or private equity fund.

The final version adopted by the regulatory agencies excludes publicly offered foreign funds, insurance company accounts, certain corporate vehicles, loan securitisations and a broader array of commodity pools.

Though these regulatory prescriptions have been clarified and cleared, still the hedge fund industry as a whole faces the following challenges and trends.

–          Performance is always a key challenge

–          Regulations still continue to play a big role

–          Regulations will impact operational and technology decisions

–          Increased competition is fuelling challenges around asset rising for firms of all sizes and strategies

–          Hedge fund firms are often smaller in size than in previous years

–          Many are using managed account structures

–          Long / short equity continues to be the most popular strategy

–          Planning for technology infrastructures and risk management practices

–          Creation of a technology road map that takes the firm’s future growth into account

–          Putting processes in place to function

–          Embracing cloud technology and in particular private services to cut costs

To ensure that they survive and steadily grow, the hedge fund industry needs to maintain the sustainable cutting edge, adaptability, value addition, business and marketing acumen.

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