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2013 Business Expense Benchmark Survey
area of concern and FATCA also is fairly high on the
radar for these funds given the focus of those rules
on offshore investors. The only regulatory topic
not registering as a moderate to severe concern for
EMEA hedge fund managers is the emerging set of
Asian regulations.
Managers in APAC seem to have the least level of
regulatory concern, even about the rules coming into
play in their own region. These managers express the
most concern about AIFMD, but only see that as having
a moderate to significant, not severe, impact on their
organizations. SEC/CFTC registration, compliance
and reporting are seen as even less concerning with
even FATCA coming up as only a mild area of focus.
How each region addresses its expected regulatory
compliance also varies, as shown in Chart 39. In EMEA,
there is currently very little in terms of third-party
software or outsourcing options available to help
them with their compliance efforts regarding AIFMD.
This situation is likely to change once country-by
country rules around new AIF filings are determined
and software solutions and new intermediaries begin
to emerge. For now, however, software spending
related to compliance only amounts to 2.5% of total
third party spend of 4 basis points in this region.
Similarly, only 2.5% of all third party expenditures
related to compliance are being charged back to
the fund level. The equal-weighted average AUM of
the European funds highlighted in this analysis was
$4.8 billion.
This contrasts with the situation in the U.S. and
APAC. In those regions, expenditures on software
account for about 10% of their total third-party
spend on compliance. This reflects uptake of Form
PF and Form CPO-PQR reporting packages and other
data management offerings geared to support SEC
and CFTC regulatory filings. These new reporting
requirements apply to all U.S.-based managers with
>$150 million AUM and to the majority of APAC firms
that invest heavily in marketing to U.S. clientele.
The deadline for aligning to these filings is now nearly
1 year in the past. All firms that have registered with
the SEC or the CFTC have been through at least
one regulatory reporting period, and have another
approaching soon. Larger firms have been through 5
and are approaching their 6th reporting period since
the filing deadlines kicked in during mid-2012.
There are also more firms offering outsourced
solutions for this market, a portion of which can
be more readily charged back to the fund level as
opposed to being primarily borne by the management
company. In the U.S., 52% of the total 2.3 basis
points of compliance expenses are being charged
back at the fund level and in APAC, 41% of the 0.28
basis point expense is being charged back.
Chart 39: Third Party Spend on Compliance
by Region
38%
AMERICAS
EMEA
APAC
Software
Third-Party Fund
Third-Party Management Co.
$7.57M
$8.44M
2.3
bps
Source: Citi Prime Finance. Total data set examined (124 firms, $465 billion AUM)
%
20%
30%
40%
50%
60%
70%
80%
90%
100%
10%
4
bps
28
bps
Third-Party Compliance
Expense by Region
.038%
.012%
.115%
.001%
.001%
.030%
.002%
.009%
.136%
Chart 40: Headcount Intentions Linked
to Regulation
38%
AMERICAS
EMEA
APAC
Stay the Same
Decrease
Not Yet Certain
$7.57M
Source: Citi Prime Finance. Total dataset examined (124 firms, $465 billion AUM)
0%
20%
30%
40%
50%
60%
70%
80%
90%
100%
10%
Increase