AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

Major paper on challenges of regulatory compliance

By Andrew Baker, CEO

AIMA

Q2 2013


AIMA members may be aware that we have recently embarked on a major research project about the costs of regulatory compliance. The paper will be the product of a unique AIMA collaboration with the Managed Funds Association and KPMG International. Our three organisations recognise that regulatory compliance is one of the biggest challenges facing hedge fund managers in this post-crisis environment, and we are working together to conduct a comprehensive, global survey which will set out to identify how managers are dealing with regulatory compliance and to weigh the operational costs of compliance to managers and to investors.

Reflecting our global presence, the report, which we hope to publish in October 2013, will compare the costs of compliance across different regions and for different pieces of regulation. It will also examine some of the practical solutions that managers have implemented in response to the demands of regulatory compliance.

I do hope as many of our manager members as possible are able to participate in the survey. The results will be extremely helpful to us in our on-going engagement with regulators and policymakers. Anyone interested in taking part should contact info@aima.org by 30 June.

This will be the latest in a series of heavyweight reports that we have produced since the crisis. Many of these reports have helped us to construct a positive narrative about the value of the industry to investors, markets and the broader economy.

They include ‘AIMA’s Roadmap to Hedge Funds’, the first ever guide to institutional investment in hedge funds, which is now on its second edition; and the two-part ‘state of the industry’ report we produced last year with KPMG that drew on original research about the value of the industry from London’s Imperial College.

In recent weeks, you also may have seen two new AIMA papers, both of which can be downloaded from our website.

Contributing to Communities’ is, we believe, the first ever global review of the hedge fund industry’s charitable activities. It gives a detailed picture of those activities that are in the public domain, from workplace-giving schemes and industry fundraising campaigns to individual examples of philanthropy, and highlights projects and donations that support education, healthcare, the arts and disadvantaged communities throughout the world.

Beyond 60/40: The evolving role of hedge funds in institutional investor portfolios’ was produced by the AIMA Investor Steering Committee (ISC), a group of leading institutional investors in hedge funds who undertake educational initiatives and provide practical guidance within AIMA. The ISC spoke to a number of pension funds, endowments, foundations and family offices worldwide and asked them what they are looking for from their hedge fund allocations, especially at a time when real interest rates are close to zero or even into negative territory and with volatile markets that are quick to inflict swift losses. What the investors said in their responses was that they regard hedge funds as solution providers offering tools to customise their portfolios - enabling them to meet individual objectives in terms of risk-adjusted returns, diversification, lower volatility and downside protection.

What was also notable, at a time when the industry’s average performance has been relatively modest, was that most respondents said they had increased their hedge fund allocations since the financial crisis and were planning further increases in the coming years. Traditional ‘60/40’ portfolios, for this sample at least, are a thing of the past.

 

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