Hedge fund managers expect increased regulation under US administration

Date: Friday, November 21, 2008
Author: Hedgeweek.com

More than 98 per cent of senior hedge fund managers believe the new US administration is likely to increase regulation of the hedge fund industry, according to a report by accountancy firm Rothstein Kass.

The report, 'A New Regime: The Regulatory Climate for Hedge Funds', found that an overwhelming majority also suggested that associated compliance costs will make hedge funds more costly to operate, with over 80 per cent of respondents in agreement.

While just over 75 per cent of participants suggest that the overall impact of the new administration will be negative, most reported that increased regulation will not lead to more fund closures or fewer start-ups.

Howard Altman, co-managing principal of Rothstein Kass, says: 'It's a generally accepted behavioural concept that uncertainty creates negative emotions. The financial services industry in particular has always been leery of the unknown, as uncertainty magnifies risk. Consequently, we expected our findings to show a degree of scepticism regarding the new administration and its regulatory agenda. The election's focus on the economy left many with the impression that regulatory reform will be a priority for the new regime. While the scope of these efforts is not yet defined, it is apparent that the hedge fund industry believes that regulatory action is on the horizon.'

The survey was based on telephone interviews with 313 hedge fund senior partners at US-based hedge fund organisations.

Just over 70 per cent of the participants reported assets under management between USD100m and USD750m.

Nearly 30 per cent of firms reported assets under management in excess of USD750m.