The post-2008 influx of institutional money into hedge funds has resulted in a marked increase in the global hedge fund industry's operational sophistication and transparency to investors, says a new report by KPMG International and the Alternative Investment Management Association (AIMA), the global hedge fund association.
The report, The Evolution of an Industry is based on a survey and in-depth interviews of 150 hedge fund management firms globally with more than $550 billion in combined assets under management. It found that hedge fund management firms have improved their operational infrastructure in areas like investor transparency and regulatory compliance as allocations from institutional investors have increased.
Seventy-six per cent of respondents have observed an increase in investment by pension funds since 2008, while institutional investors as a whole, including funds of funds, accounted for a clear majority (57 per cent) of assets under management.
The report finds that the increase in institutional investment has led to more thorough due diligence and greater demands by investors for transparency, with 90 per cent of respondents reporting an increased demand for due diligence since 2008.
Eighty-four per cent of all respondents indicated they had increased transparency to investors since 2008, which is reflected by the fact that the majority of firms have taken on multiple members of staff to respond to these increased investor demands.
The report also found that hedge fund management firms had almost universally increased investment in regulatory compliance since 2008, with 98 per cent of firms hiring additional staff in this area.