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2011 global hedge fund survey - Future hedge fund landscape - EY - United States

2011 global hedge fund survey: coming of age

Future hedge fund landscape

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Investors haven’t shown tolerance for organizations lacking internal control, governance and infrastructure.

Regulatory uncertainty is a key concern, but clarity and education may reduce the industry’s mystique and serve as keys to future success.

Regulatory uncertainty continues to be top of mind for both managers and investors. However, until such time as global regulation is clearly defined and rules finalized, the fog of uncertainty will remain.

The industry is feeling significant pressure to reduce its opaqueness in order to alleviate investor and regulator demands and concerns. The responses — outsourcing, increased reporting, expanded risk management — have clearly increased the cost of doing business in a time period where alpha generation has been a challenge.

It is clear that investor preference is to have more independent oversight and involvement in their funds’ operations. Investors and regulators need better education on the capabilities of managers, administrators and boards so governance can be addressed holistically and not from a functional compliance point of view.

Those managers that listen to their investors by planning for succession, solidifying a sustainable franchise, and developing an operational infrastructure to meet investor demands around risk management and corporate governance will have a leg ahead in the race to raise funds.

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