KEYWORDS: alpha, risk management, hedge funds, assets under management, AUM, Volatility, Macro, SEC, Securities and Exchange Commission, Form PF, hedge fund registration, asset allocation, alternative investment, high-water mark, compliance requirements, Dodd-Frank Act, FATCA, Foreign Account Tax Compliance Act, AIFMD, service providers, fees, JOBS Act, United States Congress, European Union, EU, Private Equity, regulatory requirements, Hedge Fund Regulation, transparency, technology, Hedge Fund IT, hedge fund infrastructure
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.