The recent announcement, issued in the past month by the US Securities and Exchange Commission, mandates private equity, venture capital, and hedge funds to provide investors with detailed quarterly reports on performance and increased disclosure on expenses. This includes Non-US Investment Advisors who deal with US investors. The discussion did not stop there; it also addressed the practice of granting investors favourable redemption rights and additional information about fund holdings whilst requiring disclosure or explicit investor consent when funds prefer to pass on compliance costs.
Challenges for clients
With these sweeping changes to the regulatory landscape of the private funds industry, non-US managers will need to review their current policies and operational practices to determine whether changes need to be implemented, either as a direct requirement of the Private Fund Adviser Rules or as an industry best practice. Although smaller AUM funds do have longer to implement these changes it is still prompting these smaller fund managers to look for their first full-time general counsels and chief compliance officers.
Advice for clients
Larger firms have less time on their side and are starting to examine what type of additional support is going to be needed within their compliance functions to be able deal with these changes, with reporting technology being a high priority. Although it is expected that a significant portion of the costs will be frontloaded on contractors/project resources, we are likely to see a high demand for advisory candidates strong aptitude for tech and have previous SEC experience. Ideally, those who have the ability to comfortably explain to portfolio manager investors the new rules around disclosure should be sought after.
If you are concerned about how the current market may affect your position, or to discuss how we can support your hiring processes in the current market, please get in touch with Principal Consultant in the Compliance and Risk office, Chris Wood, at email@example.com.