In the immediate aftermath of the financial crisis, hedge fund executives were worried that they would be scapegoated, painted as villains for the market gyrations and the implosion of top broker dealers. But it gradually became clear that alternative investment providers fared well from a regulatory perspective.
Relatively speaking, the new, more detailed Form ADV 2 requirements and Form PF private disclosures are quite light, compared to what large banks have been through in terms of Dodd Frank. So it isn’t all that surprising that hedge funds as a group are actually pleased with Dodd Frank. A new study from the business school at Hofstra University and the accounting firm EisnerAmper has “found most hedge funds felt that registration was the cost of doing business and believed that investors felt safer as a result of it,” reports The New York Times.
We have long suggested that limited investors are increasingly calling the shots. And they are demanding a lot in terms of third-party administration, compliance practices, redemption policies and the like. They want assurances that the fund is on the up and up. Even when the idea of original, pre-registration requirement was struck down by the courts, some forward-looking funds voluntarily complied. There are many aspects of Dodd Frank that will face legal challenges, but hedge fund registration will likely survive.
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