12.30.2011

Hedge Funds Get Help

12.30.2011
Terry Flanagan

Complexities of compliance and transparency dictate outside support.

Hedge funds are upgrading their processes, procedures, and technology in order to satisfy investor demands for grater transparency. Especially for smaller funds, this means outsourcing some or all operations.

“Investors are looking for institutional characteristics of a hedge fund, such as multiple prime brokerage relationships, top-flight technology, high levels of compliance, and daily reporting,” Peter Salvage, managing director of hedge fund services at Citi. “This is hard for small funds, although the largest-sized managers have largely solved it.”

Citi’s global operating system provides support for all investment products, strategies and instruments, and is especially adept at providing valuations for complex securities, Citi said.

The final rules of Form PF announced by the SEC have opened up a whole new era for hedge fund and private equity businesses, which will now be forced to disclose more information to the U.S. government than previously required.

While the rules of Form PF require managers to now disclose more information to the Securities and Exchange Commission as outlined in the Dodd-Frank Reform Act, the final rules will also make it easier for them to report earnings than outlined in the original rules.

“Form PF is part of a larger trend in the need to provide daily reporting of OTC derivatives,” said Salvage. “These include reporting of daily valuations, reporting data to trade repositories, and new margin requirements as a result of the new OTC clearing environment.”

“It’s not just filling out forms,” Salvage said. “It entails real changes to operations.”

One of the significant differences that the SEC has made in comparison to the Form PF’s original version is the assets under management (AUM) at which private fund advisors must report, which was raised from $1 billion to $1.5 billion.

Advisors will also now have a 60-day reporting deadline as opposed to the 15-day deadline that was initially proposed.  In addition, Form PF will also take effect later than originally intended with advisors with over $5 billion AUM, the first to be affected, having to report in the middle of 2012.

Related articles

  1. Richard Turner of Insight Investment sees more automation and more transparency around cost and outcomes.

  2. The suite enables GAM to seamlessly manage market risk exposure and liquidity and investment risk.

  3. Asset manager anticipates an SEC decision on converting its fund to a spot bitcoin ETF by early July.

  4. Fidelity continues to hire thousands to support cryptocurrency.

  5. Tradeweb Draws Buy Side in Europe

    Net sales registered net outflows of €3bn, compared to €42bn in March 2022.