It is undeniable that public opinion has turned on the “wizards of Wall Street” and that public outcry is growing for high levels of scrutiny and oversight of the now-maligned hedge funds. With proposals in place requiring hedge funds to register with the SEC, and the imminent establishment of a systemic regulator, it is clear that new, rigorous disclosure and reporting requirements for hedge funds and other alternative asset managers will become law in a matter of months.
Just as after Enron – when Sarbanes Oxley brought sweeping changes to public company disclosure rules – the financial crisis and fear of Ponzi schemes are pushing new legislation into the fast lane. Soon we will see similar sweeping changes to hedge funds and other alternative asset managers’ requirements.
In addition to a long list of requirements from regulators, managers will also face much higher standards for transparency and justification for performance and management fees from investors. Based on this industry evolution, it is critical to look back on what occurred in the years after Sarbanes Oxley took affect to help determine the best course of action for hedge funds and other alternative asset managers to reap maximum benefit for their businesses.
FinServ believes that this course of events presents a unique window of opportunity to those funds that are savvy enough to take advantage of it. We expect investor dollars to begin to flow back into alternative assets toward the end of this year. Forward-looking investment managers need to be positioned to adeptly handle regulation and other informational requests to attract new asset inflows.
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