Institutional investors spur hedge funds to grow operations and increase
TORONTO, June 19, 2012 /CNW/ - The hedge fund industry has undergone
significant change since the beginning of the financial crisis,
resulting in the need to grow operational infrastructure and increase
transparency, says a report by KPMG, and the Alternative Investment Management Association (AIMA).
Prior to the crisis, the primary source of capital came from
non-institutional investors such as high-net worth individuals and
family businesses; however institutional investors are now the leading
allocators to hedge funds. This change means hedge funds have had to
adapt to the new source of capital, and the demands associated with
institutional investors— namely the need for a more robust operational
infrastructure and thorough terms of due diligence.
"The increased due diligence demands of institutional investors are
certainly being felt by Canadian managers," said Peter Hayes, Partner, National Director, Alternative Investments, KPMG. "That
being said, the Canadian hedge fund market has always been heavily
regulated and Canadian managers are well-positioned to meet the
increased scrutiny from investors, regulators and others that many in
the global hedge fund space are only just starting to experience."
The report, The Evolution of an Industry, is based on a survey and in-depth interviews of 150 hedge fund
management firms globally with more than US$500 billion in assets under
management. The report found that:
Institutional investors now represent a clear majority of all assets
under management with 57 percent of assets under management in this
84 percent of all respondents in the survey indicated that they had
increased transparency to investors since 2008
The amount of time managers say they have spent handling due diligence
inquiries from investors has doubled since 2008
Hedge fund managers have significantly increased headcount to respond to
regulatory compliance requirements (98 percent of respondents), and
investor demand for transparency and due diligence
New money injected into the hedge fund industry since 2008 has come
primarily from North America, Asia-Pacific and the Middle East, while
allocations from the European Union have held steady, and those from
Switzerland have declined
"Institutionalization has been described as the continuing inflow of new
institutional capital into the industry, but as this report
demonstrates, it is also about increasing the sophistication of
operational infrastructure with respect to transparency, compliance and
due diligence," said Gary Ostoich, Chairman, AIMA Canada.
The new report is the second of a two-part series by KPMG and AIMA on
the state of the global hedge fund industry. The first report looked at hedge fund industry performance, risk and volatility.
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the
laws of Ontario, is the Canadian member firm of KPMG International
Cooperative ("KPMG International"). KPMG member firms around the world
have 145,000 professionals, in 152 countries.
The independent member firms of the KPMG network are affiliated with
KPMG International, a Swiss entity. Each KPMG firm is a legally
distinct and separate entity, and describes itself as such.
About the Alternative Investment Management Association (AIMA)
AIMA is the hedge fund industry's global, not-for-profit trade
association with over 1,300 corporate members (with over 6,000
individual contacts) in more than 40 countries worldwide.
Members include hedge fund managers, fund of hedge funds managers, prime
brokers, legal and accounting firms, investors, fund administrators and
independent fund directors. They all benefit from AIMA's active
influence in policy development, its leadership in industry
initiatives, including education and sound practice manuals and its
excellent reputation with regulators.
AIMA Canada, the Canada National Group of the Alternative Investment
Management Association (AIMA), was formed in March 2003 to act as the
voice of the alternative investment industry in Canada. AIMA Canada now
has over 80 corporate members. Additional information on AIMA Canada is
available at www.aima-canada.org
SOURCE KPMG LLP
For further information:
Senior Manager, Media Relations
KPMG in Canada
James Burron, CAIA
Chief Operating Officer
Alternative Investment Management Association (AIMA) Canada
O: (416) 364-8420 C: (416) 453-0111