MFA Blog

Citi Survey Shows Regulation as Significant Force in Hedge Fund Industry Evolution

Posted on June 30, 2014

Regulation of the global hedge fund industry will likely be one of the leading forces driving change in the evolution of the industry.  Citi Investor Services released the results of its 5th Annual Industry Evolution survey earlier today, noting that the complexity and scope of the regulations will likely be among the predominant forces of change in the industry.

Among the new regulations, key implementation deadlines loom from Dodd-Frank, EMIR, and AIFMD.  “As the demands of the new regulatory environment emerge, market leaders need to build out new capabilities, platforms and processes to survive and transform their organizations,” Sandy Kaul, Head of Business Advisory Services at Citi, said in a press release.  “Understanding how this complex regulatory landscape is changing is a vital first step in that process.”

The report also noted that there is a “collateral conundrum,” due to more strategies being executed but less financing readily available.  “The pool of collateral that hedge funds control is likely to continue to expand…[which] could lead hedge funds to begin treating collateral as an asset class with which they can supplement their trading book profits by effective use and pricing of their collateral pool,” the report highlighted.

Read the full report online from Citi, and access the press release here.