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The report is the biggest ever global hedge fund survey, covering 200 managers managing more than $900 bn in Europe, Asia and US.

The report examines the extent to which the industry is investing heavily in the infrastructure of regulatory compliance.

My selected key findings in this report:

• The hedge fund sector is making great efforts to achieve compliance. It’s part of a broader picture of managers building their infrastructure in order to attract more institutional capital.
• Operating costs dedicated to regulatory compliance represent an average 7% of operating costs.
• Few managers pass these costs to investors and therefore regulation impact margins.
• Barriers to entry for the industry are being raised because the cost of that compliance disproportionately impacts smaller managers.
• Regulatory constraints have a major impact on business strategy, especially for the big firms.
• AIFM and SEC registration are perceived as the more costly regimes.

More importantly, according to the survey, two types of attitude will emerge : 48% consider changing their operating model and the other half not. There was no real variation of this split across firm size or regions. Certainly the bigger firms have or will develop their legal and compliance capabilities as the smaller firms are more likely to continue to outsource their operating model.

In term of product development, the reports outlines a general view that « Products are driven by client demand not by regulation ». Nevertheless, client demand is more and more driven by their own regulatory framework.

The report can be downloaded on aima.org - kpmg.com - kpmg.com