Perceived benefits of hedge fund regulation deteriorating, says Ernst & Young

Date: Tuesday, November 6, 2012
Author: Emily Perryman, HedgeWeek

Despite increasing regulatory requirements for hedge funds, only 10 per cent of investors feel that regulations effectively protect their interests and 85 per cent of investors do not believe these requirements will help prevent the next financial crisis.

This is according to Ernst & Young's sixth annual survey of the global hedge fund market, Finding Common Ground.

The 2012 survey, compiled by consulting firm Greenwich Associates for Ernst & Young, compares opinions from 100 hedge fund managers who manage over USD710bn and 50 institutional investors with over USD190bn allocated to hedge funds on current topics related to the hedge fund industry.

Findings show that although the two groups agree on increasing investments in headcount, technology and risk management, stark contrasts exist on compensation structure, fees and expenses.

Ratan Engineer, global leader of Ernst & Young's asset management practice, says: "Our survey findings suggest that hedge fund regulations are not beneficial to investors, who overwhelmingly question their purpose and proliferation. It may still be worthwhile for hedge fund managers to constructively engage with regulators to help them stay focused on the main goal – financial stability – rather than introducing more costly or unnecessary requirements that investors feel are of little value."