Compliance keeping you up at night?
Reports, reports, reports!
It’s enough to wake any hedge fund exec in the middle of the night in a cold sweat – the compliance nightmares.
Sign o’ the times
In just a few years, we’ve seen the alternative investment industry go from relatively unrestricted to tightly regulated. Reporting demands have exploded. Examinations and audits have become a way of life. And transparency is the new watchword.
In this highly controlled and scrutinized environment, regulatory and investor compliance capabilities have become ever more crucial—both for hedge funds and their service providers.
There may be some pushback. In the States, for instance, the Trump administration has vowed to roll back chunks of the Dodd-Frank Act as part of its promised overhaul of financial sector rules. We’ll also have to see what impact Brexit will have on activities in the UK, the EU and wider world.
But any rule changes or reductions will be slow. And if we are now moving into an era of regulatory fragmentation, it could actually make hedge funds’ lives more complicated, not easier, as they wrestle with diverging requirements.
Whatever happens, firms will need operational flexibility and scalability to tackle the challenges. And, crucially, an enterprise-wide, compliance-oriented culture that is committed to best practices. For where compliance may once have been a legal and regulatory-focused activity, it isn’t anymore. Today, the emphasis is on effective, end-to-end governance oversight throughout the organization.
Relieving the stress
It’s a burden, sure. But an unavoidable one. So what can you do to cope?
Technology is one solution. Actually, more than a solution—it’s become a necessity. The speed, complexity and sheer scale of firms’ compliance obligations mean these tasks can no longer be done in an unautomated, non-systematic way. Not unless you want to employ an army of operational and compliance staff.
Of course, we would say that, wouldn’t we! But it’s not just us.
Industry surveys are also pointing to fund managers’ efforts to invest in technology and work with their service providers to streamline compliance activities, reduce the associated costs, and integrate the processes into all aspects of their everyday operations … from investment research and trading through to client servicing and fund reporting.
Why? Because an integrated technology infrastructure can improve data quality and reliability, and deliver real-time information where and when hedge funds need it. An automated solution suite also frees you to spend less time managing paper and people, and more time actively managing risk.
Plus it gives comfort to regulators, clients and investor prospects—helping your firm satisfy their due diligence requirements and potentially attract more institutional money.
And that, hopefully, will allow you to sleep easier.
For more information, please read our whitepaper: Hedge Fund Compliance: Building a best-practice framework
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