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Ernst & Young: Perceived benefits of hedge fund regulation deteriorates

By Rob Starr, Content Manager, Big4.com

Despite increasing regulatory requirements for hedge funds, only 10% of investors feel that the regulations effectively protect their interests and 85% do not believe these requirements will help prevent the next financial crisis, according to Ernst & Young’s sixth annual survey of the global hedge fund market.

In addition to views on the regulatory environment, the survey findings also show that although fund managers and investors are in agreement on increasing investments in headcount, technology and risk management, there are some stark contrasts in other areas.

Speaking at Ernst & Young’s annual Hedge Fund Symposium in Sydney, Ernst & Young Oceania Hedge Fund leader, Jon Pye said operational risk was one area where there was a clear distinction between the attitudes of the two groups.

“More than half of investors (56%) cited operational risk as a common driver of redemption, compared to just 10% of fund managers,” Mr Pye said. The ability of the manager to effectively manage the risks associated with generating performance is a key driver of investors’ decisions to both initially invest in and then stay with the hedge fund.

Greenwich Associates, a global research and consulting firm, interviewed 100 hedge fund representing over US$710 billion in assets under management, and the views of 50 institutional investors representing over US$715 billion in assets under management. The objective of the study was to record the views and opinions of hedge funds and hedge fund investors globally, measure the views of each on the same topics and examine the two groups together. Hedge funds and hedge fund investors were asked to comment on investor demand and hedge fund selction; headcount, infrastructure and costs,; administration; Euro-zone considerations; regulations and reporting; compensation structure; and the future landscape. For the full survey report, please visit www.ey.com/hedgefundsurvey.

 

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