KEYWORDS: AIFMD, alpha, alternative investment, asset allocation, assets under management, AUM, compliance requirements, Dodd-Frank Act, EU, European Union, FATCA, fees, Foreign Account Tax Compliance Act, Form PF, hedge fund infrastructure, Hedge Fund IT, hedge fund registration, Hedge Fund Regulation, hedge funds, high-water mark, JOBS Act, Macro, Private Equity, regulatory requirements, risk management, SEC, Securities and Exchange Commission, service providers, technology, transparency, United States Congress, Volatility
Michael Chung, Karl Ehrsam, Rob Fabio, Jeannie Lewis, Rahul Bagati
They say what doesn’t break you makes you stronger. For hedge funds, 2012 was a backbreaking year to put it mildly. Heightened market volatility, stressed global macroeconomic conditions, and underperformance relative to traditional investing vehicles were just a few of the factors that challenged hedge funds in 2012. Add the extra weight of an increasing regulatory burden, and many fund leaders might have been forgiven for packing it in.
But something telling happened instead — the industry emerged from 2012 stronger than it went in, surpassing the records it set in 2007 for assets under management (AuM) and absolute number of funds. Those that remained settled into a more measured and sustainable pace of growth, with money flowing mainly to hedge funds who altered their routines by adjusting to new demands from regulators and investors while looking for new ways to streamline back-office operations.