Hedge funds in the U.S. and Europe are adopting a wait-and-see approach to fulfill legal, compliance and regulatory requirements.
Hedge fund managers highlights
Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DBK)’s Hedge Fund Consulting Group recent survey on European and U.S. hedge fund managers highlights that hedge funds are adopting a wait-and-see approach toward complying with the Alternative Investment Fund Manager Directive (AIFMD), with 82 percent of European managers intending to delay registration until 2014.
Compliance extracts increasing time from COOs
According to the Deutsche Bank’s survey, among the managers surveyed, globally COO’s spent nearly 50 percent more time to comply with legal and regulatory matters. Specifically 61 percent of European managers and over half of U.S. managers feel their COO’s dedicate over 25 percent more time on legal, compliance and regulatory issues than two years ago.
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Over 40 percent of managers surveyed have hired more than one non-investment full-time employee to help prepare for and manage new regulatory requirements.
Delaying registration for AIFMD
In a significant ruling in August, the European Securities and Markets Authority has allowed EU firms that have obtained AIFM authorization in a member state to utilize it in other countries that have not yet transitioned to the AIFM. A period of one year was allowed as a transitional relief period by the AIFMD after its introduction on July 22, 2013.
According to the Deutsche Bank survey, 82 percent of European managers indicated their intention to wait until 2014 to apply for AIFMD registration. However, 36 percent of European mangers have shown their preference for early registration if they have further clarity and guidance on all aspects of AIFMD. And 19 percent indicated their intention for early registration if marketing opportunities arise from the EU passport.
The following graph illustrates the reasons for European managers to register before the currently anticipated date:
Interestingly, 61 percent of the managers pooled by Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DBK) indicated they do not believe that AIFMD will provide more sources of investment from institutional allocators.
As far as U.S. managers are concerned, the Deutsche Bank AG (NYSE:DB) (ETR:DBK) (FRA:DBK) survey reveals over 40 percent continue to market into Europe under transition provisions, while an additional 43 percent indicated they will respond only to incoming investor requests for information regarding their funds. Significantly, only 14 percent have chosen to comply fully with AIFMD requirements concerning non-European managers marketing non-European funds, including the transparency provisions set out in Article 22-24 of AIFMD.