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2013 Business Expense Benchmark Survey
All
Functions
Registration
& Compliance
(SEC, CFTC, AIFMD)
Regulatory
Reporting
(SEC, CFTC, AIFMD)
OTC
Derivatives
Clearing
FATCA
Asian
Regulations
>10B
10B
5B
1.5B
500M
100M
Zero
Mild
Moderate
Significant
Severe
Deep Dive: The Expense Impacts of
Hedge Fund Regulation
This year’s Business Expense survey asked respondents to provide a deep dive into their firm’s
plans in regards to spend related to regulation. Survey respondents were asked to consider various
regulations in terms of their impact on resources, software and third-party expenses. Specifically,
firms were asked about the following:
§§
SEC/CFTC registration and compliance
§§
AIFMD registration and compliance
§§
SEC/CFTC regulatory reporting
§§
AIMFD regulatory reporting
§§
Dodd-Frank/EMIR-related OTC
derivative clearing rules
§§
FATCA
§§
Asian regulatory requirements
Respondents were asked to indicate a “pain threshold”
in terms of how much each of these regulatory
initiatives was expected to impact key investment
support functions. Such functions included legal and
compliance, risk, accounting/operations, marketing
and technology.
Smallest Firms Show Most Stress to
Their People Infrastructure
Chart 34 presents a heat map showing respondents’
expected impact for each of the major regulatory
categories by size. For convenience, we have grouped
all the registration and compliance requirements
into one bucket and all of the regulatory reporting
requirements into a separate bucket rather than
considering the impact of each set of rules separately,
since it is likely that the same people within the hedge
fund organization will focus on all these efforts. Firms
that expect to be severely impacted register within
the heat map as bright red, moderately affected as
yellow, and mildly or not affected as green.
As is evident by the shading, the smaller the fund, the
more onerous the people impact of regulation. Yet,
what was also clear from the findings was that for all
firms with $10.0 billion AUM or below, registration
and compliance were more burdensome than
reporting. Reporting was more burdensome than OTC
derivative clearing and FATCA, and very little impact
was expected from the Asian regulations. Firms with
greater than $10.0 billion AUM were nearly all green,
showing that they expected little impact from the
regulatory mandates overall.
Flipping this around, it is instructive to understand
functionally where the greatest impact was
anticipated within the hedge fund organization. This
is illustrated in Chart 35.
Chart 34: Level of Effort Required from Existing Staff to Meet Regulatory Mandates:
by Regulatory Initiative