Hedge Fund Intelligence New standards in Investor Transparency | Page 7

NEW STANDARDS IN INVESTOR TRANSPARENCY

Dodd-Frank, according to White’s numbers, the SEC had information on some
2,500 hedge funds. Soon after it, 1,500 new funds stepped forward, bringing
the total to just over 4,000.
“Until then,” said White, “we did not know that we had not accounted for
one-third of the industry. Today, as we now know, approximately 40% of the
investment advisers, who are registered with the SEC, manage one or more
hedge funds or other private funds.”
The other regulatory jab to the ribs of the US investment management industry, JOBS, has impacted hedge funds in a very different way, by encouraging a
level of openness that would have been regarded as heresy by many managers
a decade or so ago.
“As of September 23, 2013,” explained White, “hedge fund managers feel they
have a new freedom to communicate with the public, to advertise, to talk to
reporters, to speak at conferences and, most importantly, communicate with
investors openly and frankly. And you can do these things without the fear of
securities regulators knocking on your door, or your outside counsel screaming at you.”
That will be welcome news to every journalist, every research analyst and
every student that has googled scores of leading hedge fund managers only to
encounter startlingly uninformative websites, password-protected against
external scrutiny by anyone other than deep-pocketed clients.
Nobody contests the view that regulation has played a decisive role in
pushing hedge funds towards enhanced transparency. A number of industry
participants say, however, that initiatives ranging from AIFMD to Dodd-Frank
have probably acted as catalysts for change, rather than as the sole drivers of
a Road to Damascus-style rethink among hedge funds.
A more important driver, say many, has been the increasing participation
in the hedge fund industry of institutional investors, which has gathered
momentum since the financial crisis. The trend towards the increased institutionalisation of the hedge fund industry is confirmed by industry surveys on
the size and structure of the market. According to the latest snapshot of the
industry taken by Deutsche Bank’s Global Prime Finance busin ess, nearly
half of institutional investors upped their hedge fund allocations in 2013, and
57% plan to increase their allocations in 2014.
© HedgeFund Intelligence

June 2014 Special Report 7