Hedge Fund Firms Spend Significant Costs on Compliance

KPMG, together with the Alternative Investment Management Association and the Managed Funds Association, conducted a survey of global hedge fund managers, which reports that firms spend more than 7% percent of their total operating costs and over 10 basis points (as a percentage of AUM) on compliance. Small firms (less than $250 Million in AUM) spend approximately $700,000 per year on compliance costs and commit more than 10% of total operating costs to compliance, while the largest firms (greater than $5 Billion in AUM) spend more than $10 Million. The Report states that the hedge fund industry expects compliance costs to increase into the future. Approximately 2/3 of firms have utilized outside providers to assist with compliance requirement to free up internal resources and reduce the risk of non-compliance. The survey included 200 hedge fund managers representing over $900 Billion in AUM.