Kaal claims by topic: private-funds, page 2

405 atomic, individually citable claims from the published work of Wulf A. Kaal tagged private-funds.

The interpretation Form PF demands generated particular concern among filers about the definition of counterparties and about counterparty performance measures. 2014
Form PF instructions need clarification and its definitions, including those for RAUM and AUM, need improvement, since there is evidence that questions and definitions had to be optimized. 2014
Because several core Form PF questions feeding the FSOC's stage one threshold screen are themselves defective, the FSOC's systemic risk assessment process could be compromised. 2014
Because the FSOC uses RAUM related valuations directly and indirectly to set stage one thresholds, and because RAUM requires substantial filer interpretation, it is questionable whether the FSOC can use that Form PF data effectively and sustainably for systemic risk evaluations and SIFI designations. 2014
The Form PF counterparty questions most affected by filer interpretation, Questions 22 and 23, are the very ones the FSOC uses in stage two to determine the interconnectedness of private funds. 2014
Widespread filer disagreement with Form PF definitions implies that a large share of filers are uncertain how to answer, which raises the possibility that they complete the form with estimates and varied assumptions. 2014
If the FSOC relies on inaccurate Form PF data in its systemic risk assessment, its work on private funds may itself be erroneous. 2014
Private fund advisers reporting under Form PF encountered issues that could affect the FSOC's systemic risk assessment, but the author does not claim that the FSOC is unable to fulfill its congressional mandate. 2014
Matching the identified Form PF defects against the FSOC's specific uses of that data suggests possible inaccuracies in the FSOC's systemic risk assessment process, although the author disclaims scientific or empirical precision for the analysis. 2014
Fixing the identified problems with Form PF data would help optimize the FSOC's systemic risk assessment of private funds. 2014
Confluence between mutual and hedge funds runs in two directions at once: mutual funds are converging on hedge funds along the dimension of investment strategy, while hedge funds are converging on mutual funds along the dimension of regulation. 2016
The private fund industry grew 26 percent between 2013 and 2015, rising from just over 2 trillion dollars of assets under management to 2.7 trillion dollars. 2016
Net assets of mutual funds using alternative strategies quadrupled between 2007 and 2014, a 27 percent annualized growth rate, while the number of such funds rose from 181 to 402. 2016
Growth in retail alternatives is expected to continue rather than plateau, with projections that 15.8 percent of all mutual fund assets under management will sit in alternative mutual funds by 2022, making it a multi-trillion dollar industry. 2016
Operating a mutual fund is materially more capital intensive than operating a hedge fund: the mutual fund adviser's required investment in trading and operational technology and in specialized staffing substantially exceeds what a hedge fund manager must spend. 2016
Hedge fund investors have almost no statutory remedy: the regime establishing a hedge fund investor's rights is severely limited, nearly to the point of nonexistence, in the United States and in the offshore jurisdictions where many hedge funds are chartered. 2016
Identical rules diverge in practice because the two vehicle types are structured, operated, and run as businesses differently; the Investment Advisers Act applies to both, yet its obligations are far more onerous for mutual fund managers. 2016
Freedom from significant regulatory oversight is what historically enabled hedge funds to run more exotic, more leveraged strategies aimed at absolute returns. 2016
Alternative mutual funds generally cannot deliver the same absolute returns as hedge funds, a shortfall some attribute to the lighter touch regulation and better incentives available to hedge funds. 2016
The traditional mutual fund governance model, in which one board serves multiple discrete funds within a sponsor's group, is subject to significant oversight challenges. 2016
In a multimanager series trust the board is largely independent of any adviser in the fund group, because the structure is centered on an unaffiliated administrator rather than on the sponsoring investment adviser. 2016
Despite open issues and possible shortcomings, the multimanager series trust structure appears to offer lasting substantive governance improvements for mutual funds. 2016
For the first time in the industry's history, the Dodd-Frank Act required most hedge fund advisers to register with the SEC, mandating disclosure of information previously treated as proprietary and private. 2016
Confluence factors help move the hedge fund industry from the fringes of finance into recognition as part of mainstream finance, aided by increased oversight under Title IV of the Dodd-Frank Act and the JOBS Act. 2016
Rising demand for alternative strategies creates incentives for mutual fund managers to find ways to simulate leverage, in an industry that historically used little leverage and presented little risk. 2016
The mutual fund industry of the future could carry more risk than its historical averages suggest, a possibility with systemic implications given the comparative size of the mutual fund market. 2016
Proposed SEC Rule 18f-4 is a potential threat to the alternative mutual fund business model, because its risk based portfolio limit could undermine managers' ability to implement their investment strategies using derivatives. 2016
Title IV of the Dodd-Frank Act of 2010 is the most significant regulatory change in the history of the private fund industry, ending decades in which the industry operated with little regulatory supervision. 2016
Attempts to rescind Title IV through the Investment Advisers Modernization Act of 2016 demonstrate that private fund registration and disclosure obligations under the Dodd-Frank Act are highly politically sensitive. 2016
Using self-reported Morningstar earnings data for 3,424 US private fund advisers covering 2010 to 2015 in multiple regression discontinuity designs with robustness checks, private fund adviser registration and disclosure under the Dodd-Frank Act had no significant effect on private fund adviser returns. 2016
The evidence contradicts the private fund industry's claim that private fund adviser registration under the Dodd-Frank Act negatively affects private fund performance. 2016
Regulation could depress reported private fund performance through a compliance cost channel: because monthly performance is reported net of fees, a significant increase in compliance costs would show up immediately in monthly performance figures. 2016
A second channel by which Title IV could lower performance is risk reduction: private fund advisers have expressed concern that regulation will force them to take on less risk and therefore earn lower returns. 2016
Surveys of private fund managers conducted in 2012 and 2015 show that a clear majority of managers believed increased compliance costs negatively affect the industry. 2016
Private fund managers themselves distinguish costs from returns: a majority of surveyed managers opined that Dodd-Frank Act registration and disclosure requirements do not affect the returns of the private fund industry, even though compliance costs affect the profitability of their management companies. 2016
Estimates of annual Dodd-Frank Act compliance cost for private fund advisers range from $50,000 to $400,000 per year. 2016
The quarterly Form PF reporting obligation imposed on advisers with more than $1.5 billion in regulatory assets under management attributable to private funds exists to give the FSOC timely data for identifying trends in systemic risk. 2016
Because private funds evolved under low or no regulatory supervision until Dodd-Frank, the large prior literature on private fund performance largely does not assess the implications of private fund regulation, leaving a gap this study fills. 2016
Beyond the authors' own prior work, there is no other empirical evidence on the effects of the Dodd-Frank Act on the private fund industry. 2016
In simple linear regressions of monthly returns on log AUM across December 2011 to December 2012, fund size does not appear to matter for fund returns because only a few coefficients are statistically significant and those remain close to zero. 2016
Around the registration effective date, whether a fund's AUM sits above or below the $150 million regulatory threshold does not play a significant role in explaining hedge fund returns for the entire sample. 2016
A single point in time RD design anchored to March 30, 2012 is inadequate on its own because advisers could and did register before the deadline, funds near the $150 million threshold could choose between registered adviser and exempt reporting adviser status, and self-reported Morningstar AUM is not calculated the same way as the SEC's RAUM. 2016
To sharpen assignment to treatment and control, actual registration histories were pulled from the SEC's IAPD website and historical Form ADV data and combined with Morningstar variables to build two additional control groups: firms already registered with no status change, and foreign firms completely unaffected by the US legal regime. 2016
Prior work by Kaal shows that Dodd-Frank Act registration and increased compliance requirements only marginally increase the cost structure of private funds, and finds non-robust evidence that higher administrative costs are a second-order effect that does not affect overall private fund returns. 2016
Government assessments of hedge fund systemic risk conflict directly: the OFR, FSB, and IOSCO treat private fund activities as important threats to the financial system, while the UK Financial Services Authority concluded from its first comprehensive survey of London's private fund industry that hedge funds pose no systemic risk. 2016
Despite conflicting government reports, the weight of post-crisis evidence from leading financial economists supports the conclusion that hedge funds introduce at least some systemic risk into the financial system. 2016
Public perception, rather than measured risk, is the principal driver of the hedge fund systemic risk debate and of the policy responses to it, and that perception is shaped chiefly by industry growth and by the collapse of prominent funds. 2016
Hedge fund assets under management grew from $118 billion at the end of 1997 to more than $2.7 trillion by the end of 2014, a compound annual growth rate of 19 percent. 2016
Because hedge fund losses are absorbed directly by a large and dispersed body of investors and their equity capital, private fund advisers are unlikely to trigger a systemic event, and their activity may even reduce market volatility. 2016
Private fund advisers in the shadow banking system perform bank-like functions, providing liquidity to clients and to financial markets and engaging in various forms of liquidity transformation, and the vulnerabilities this creates may have large implications for financial stability. 2016
Hedge funds' risk management practices are typically evolved enough to constitute a major barrier to systemic shocks, and their trading counterparties and lenders further help prevent losses large enough to disrupt the financial system. 2016
Hedge fund losses large enough to affect the overall economy did not appear until after the crisis and recession had already been triggered by the mortgage market collapse and sustained stock market losses, which places hedge funds downstream of the crisis rather than at its origin. 2016
The performance pressure on hedge fund managers incentivizes them to take disproportionately high risks in order to deliver sufficient client returns, and those disproportionate risks translate into proportional systemic risks. 2016
Concern about hedge fund leverage is empirically overstated: since the collapse of LTCM in 1998 the industry's exposure to leverage has been relatively modest, especially compared with the mean leverage of investment banks and broker/dealers. 2016
Although hedge fund return volatility is less sensitive to financial system risks than that of brokers, banks, and insurance companies, nonlinear Granger causality tests show that between 2001 and 2008 volatility was transmitted across all parts of the system, including from hedge funds to brokers and banks. 2016
Hedge funds have the potential both to amplify and to mitigate systemic risk, and which effect dominates turns on their particular risk management incentives, leverage, and investment strategies, which is why the academic evidence remains mixed. 2016
The study rests on two datasets: SEC Form ADV Part II filings by private investment fund advisers from 2007 to 2014 (N=100392) and the publicly available litigation record on private fund investor due diligence from 1995 to 2015 (N=572). 2016
The private fund industry grew by 26 percent between 2013 and 2015, rising from just above 2 trillion dollars in assets under management to 2.7 trillion dollars. 2016
Because a material omission or misstatement in Form ADV Part 2A can support a serious securities law charge, private fund managers have an incentive to keep the narrative language of that required disclosure as high level, summary, and non committal as possible. 2016
From 2007 to 2014 an increasing number of Form ADV Part II filers deemed investor due diligence worth mentioning, and an increasing number of filers qualitatively increased their due diligence disclosures in the brochure filings. 2016
Since 2010 an increasing number of SEC Form ADV Part II brochure filers included investor due diligence disclosures, but the number of filers including such disclosures remained relatively even between 2012 and 2014. 2016
The intensity of due diligence mentioning relative to total Form ADV Part II brochure filings increased substantially, and the due diligence count exceeded the total number of ADV II filings for the first time in 2014. 2016
Form ADV Part II filings jumped from 3,024 in 2010 to 21,685 in 2011, and that jump was accompanied by a corresponding increase both in the number of filings mentioning investor due diligence and in the due diligence counts within those filings. 2016
Although overall Form ADV Part II filings fell between 2012 and 2013, due diligence counts fell only marginally, from 20,828 to 20,031, and filings mentioning due diligence fell from 7,862 to 7,198, less than proportionally to the drop in total filings. 2016
The Form ADV analysis is limited because the term due diligence carries multiple possible meanings, so counts of the term cannot by themselves distinguish among those meanings. 2016
The data suggest that since 2010 private fund advisers increasingly engage in investor due diligence in order to protect themselves from investor criticism and lawsuits. 2016
Lacking standards for private fund investor due diligence can partly be attributed to private funds' unique market position: unlike mutual funds, private funds evolved as unregistered entities free from most regulatory oversight, so their due diligence evolved without regulatory oversight as well. 2016
The originators of the earliest U.S. hedge funds deliberately structured the funds to maximize trading freedom by minimizing exposure to federal regulation, so the industry's private, unregistered form was a design choice rather than an accident of history. 2016
The SEC's 1985 safe harbor in Rule 203(b)(3) allowed a limited partnership itself, rather than each of its limited partners, to be counted as a single client of the general partner acting as adviser, which is what kept hedge fund advisers below the registration threshold. 2016
Expanding the client counting safe harbor in 1997 to cover legal entities generally allowed investment advisers to manage large amounts of securities indirectly for several hundred investors across multiple hedge funds without registering. 2016
Some of the most sensitive Form PF disclosures are not readily obtainable by the funds themselves: counterparty credit exposure often cannot be determined by individual fund managers, which makes the reporting requirement burdensome in practice. 2016
Contrary to the hedge fund industry's own predictions, the industry has absorbed Form PF quickly and the impact of the Dodd-Frank registration and disclosure rules has proven much less intense than the industry initially anticipated. 2016
The majority of hedge fund advisers spent less than $10,000 preparing their initial Form PF data reporting to the SEC, and subsequent annual filings cost about half of that initial amount. 2016
Larger hedge fund advisers, which must file Form PF quarterly rather than annually, faced substantially higher compliance costs for both initial and subsequent reporting than smaller advisers did. 2016
The most pressing problem with Form PF identified by the majority of SEC registered hedge fund advisers is not the volume of data but the ambiguity of the data reporting requirements themselves. 2016
The long term capital gains treatment of carried interest matters more to private equity, venture capital, and real estate fund advisers than to hedge fund advisers, because those funds hold portfolio company stock longer on average. 2016
Hedge funds retain a structural short selling advantage because they are unaffected by the restrictions imposed on mutual funds, can use derivatives to avoid margin requirements, and have pioneered procedures that lower the direct costs of shorting. 2016
The emergence of hedge funds as short sellers should be viewed as a positive development because it eliminates some of the market overpricing that the high costs of short selling would otherwise sustain. 2016
Proposals for indirect regulation of hedge funds through the regulation of the financial institutions that interact with them are unlikely to become legally binding. 2016
Banks are uniquely positioned to discipline hedge fund behavior because their role as lenders, market makers, and product creators lets them use the threat of cutting off future lending as leverage over a fund. 2016
The combined restrictions on registered investment company short selling, leverage, and organizational structure create a substantial disincentive for such companies to pursue absolute return strategies that are independent of the aggregate value of the market. 2016
The prohibition on performance fees for investment companies is the most important structural difference from hedge funds, which rely heavily on performance fees of up to 20 percent of capital gains and appreciation to give advisers incentives to produce absolute returns. 2016
Hedge fund and private equity IPOs indicate that the historic contours of the industry as privately held, unregistered, and exempt funds are slowly changing as the industry becomes a more mainstream part of finance. 2016
Title IV of the Dodd-Frank Act ended more than fifty years during which the hedge fund industry operated under low-level regulatory oversight, constituting a tectonic shift in the regulatory framework for private funds. 2016
The reporting obligations imposed on private fund advisers by Form PF raised regulatory oversight of private funds to unprecedented levels. 2016
Prior survey evidence indicates that the hedge fund industry adjusted well to the Dodd-Frank registration and disclosure requirements, and that the actual impact of those rules was much less significant than the private fund industry had feared. 2016
Growth in the private fund industry has been concentrated among the largest advisers: assets managed by advisers with more than $5 billion in AUM grew 141 percent, compared with 53 percent for firms below $5 billion. 2016
Private fund underperformance may be a product of institutionalization: pension funds have increased their private fund holdings and institutions now make up over two thirds of the private fund investor base, up from 20 percent a decade earlier. 2016
As the private fund investor profile shifts toward institutional investors, fees fall; institutional investors made up 65 percent of hedge fund AUM in 2015 compared with roughly 20 percent a decade earlier. 2016
Underperformance combined with the influx of institutional money means that pension funds, endowments and other institutions, which now outnumber wealthy individuals as private fund investors, hold more bargaining power over fees. 2016
The private fund industry generated a disproportionate share of asset management profits: it produced 34 percent of the industry's 2013 profits, $31.2 billion of $93.0 billion, while controlling only 4 percent of total AUM. 2016
Because the Dodd-Frank Act discouraged banks from growing too large and made bank lending harder, private funds and other alternative lenders filled the resulting void by financing small and medium sized businesses that traditional banks no longer served. 2016
The stronger performance of activist strategies lets activist private fund managers keep charging the higher 2 and 20 fee structure that other fund managers can no longer demand. 2016
Registered investment advisers should expect a more demanding regulatory environment ahead, including new or proposed regulations, more SEC enforcement actions against private fund managers, and longer and more intrusive examinations. 2016
The traditional distinction between mutual funds and private funds is dissipating: mutual funds are becoming more like hedge funds in investment strategy, while hedge funds are becoming more like mutual funds in regulatory framework. 2016
Survey research on private fund advisers is structurally constrained because these advisers traditionally oppose publicity and hold a strong preference for confidentiality and privacy, which makes a substantial effective sample size difficult to obtain. 2016
Neither the 2012 nor the 2015 sample is biased, and the comparison across the two populations is consistent because respondents in both surveys were equally subject to Title IV compliance obligations. 2016
The decline in survey response rate between 2012 and 2015 is itself evidence of the private fund industry's relatively rapid adaptation to the new statutory and regulatory regime. 2016
A majority of private fund adviser respondents in both surveys, 72 percent in 2012 and 75 percent in 2015, did not plan any strategic response, meaning any action to avoid or limit the impact of Title IV. 2016
The share of advisers reporting that they changed their communications with investors nearly doubled from 25 percent in 2012 to 47 percent in 2015, a shift the author attributes to advisers increasing investor communications on advice of counsel. 2016
Rather than outsourcing required compliance work, the industry is on some metrics increasingly performing that work in-house, a shift consistent with the SEC's emphasis on compliance officer liability and post-2012 enforcement actions aimed at compliance departments. 2016
Between 2012 and 2015 the annual cost of Dodd-Frank compliance doubled for many survey respondents, moving from the $50,000 to $100,000 range into the $100,000 to $200,000 range. 2016
If compliance hour requirements are treated as a proxy for compliance cost, the survey data indicate that the cost of complying with all federal regulation, not just Dodd-Frank, increased between 2012 and 2015. 2016
Private fund advisers increasingly factor the regulatory structure into decisions about the size of their assets under management, a shift partly explained by the higher post-Dodd-Frank cost structure, since higher AUM and the corresponding fee revenue can offset higher compliance costs. 2016
The finding that advisers size AUM around regulatory cost is in tension with anecdotal evidence, since only a minority of private investment funds pay expenses out of the management fee at all. 2016
Advisers typically try to allocate as many operating expenses as possible to the fund so that as much of the net management fee as possible becomes manager compensation, a practice that private fund investors heavily criticize. 2016
Sensitivity to the Form PF quarterly reporting threshold rose sharply: only 19 percent of 2012 respondents took the $1.5 billion threshold into account, compared with 33 percent in 2015. 2016
Because quarterly Form PF filing costs roughly $10,000 per reporting fund, the $1.5 billion threshold that triggers quarterly filing gives advisers a direct cost reason to factor that threshold into the AUM decision. 2016
A majority of respondents in both surveys, 76.1 percent in 2012 and 65 percent in 2015, believed the Dodd-Frank Act did not affect their reporting funds' earnings. 2016
Although Dodd-Frank compliance costs fall primarily on the investment adviser rather than the fund, advisers have increasingly built fund structures that pass most of those compliance expenses through to their reporting funds. 2016
Passing compliance costs through to reporting funds applies those costs against the funds' trading revenues, which produces an overall adverse impact on fund earnings and so shifts the burden of regulation onto investors. 2016
Among advisers who saw an earnings effect, the attributed cause shifted from direct expense to opportunity cost between 2012 and 2015, with opportunity cost references rising from 9 percent to 32 percent while increased expense references fell from 53 percent to 36 percent. 2016
By 2015 a clear majority of respondents, 93 percent, attributed effects on their investment management company's profits to additional expenses associated with the Dodd-Frank Act, and no respondent reported no additional expenses, compared with 19 percent in 2012. 2016
Even though the Dodd-Frank Act's overall regulatory impact on the private fund industry was low, the compliance costs generated by the evolving regulatory environment carry many unexpected consequences with the potential to further reshape industry practices. 2016
The comparative evidence suggests the long-term effects of the evolving post-Dodd-Frank regulatory environment may be more substantial than either the industry or regulators initially anticipated. 2016
Five years after the Dodd-Frank Act, the private fund industry is most affected by the uncertainty and the higher costs the Act generates, yet on multiple metrics the industry is coping well with the evolving post Dodd-Frank regulatory landscape. 2016
The private fund industry is adjusting well to the evolving post Dodd-Frank regulatory landscape, and the long-term impact of that landscape is much less intense than the industry itself initially anticipated. 2016
The long-term cost implications of Title IV registration and reporting obligations are absorbed relatively quickly after registration, so that Dodd-Frank compliance costs are largely manageable depending on the size of the investment adviser. 2016
Although the industry adapted well to the post Dodd-Frank environment, the Act has already produced some negative effects on the private fund industry and may produce further negative long-term effects. 2016
The survey achieved a response rate of 5.44 percent from a population of 1267 registered private fund advisers. 2016
Because private fund advisers prefer confidentiality and generally oppose publicity, most do not respond to survey questions, which makes obtaining a substantial effective sample size for survey studies of this industry difficult. 2016
Form PF raised regulatory oversight of private funds to unprecedented levels by requiring managers to disclose, for the first time, information about themselves, their funds, their investors, performance, financing, risk metrics, strategies, and credit exposure. 2016
Prior studies acknowledge that the SEC's mandated collection of private fund data through Form PF created several core challenges for the industry, but they do not sufficiently clarify the long-term impact of the Form PF disclosure requirements. 2016
Form PF required disclosures of counterparty credit exposure constitute sensitive information that individual fund managers often cannot readily determine, which makes that reporting requirement hard to satisfy. 2016
The SEC estimates that 230 U.S. hedge fund advisers with at least $1.5 billion in RAUM attributable to hedge funds at the end of any month in the prior fiscal quarter will file Form PF. 2016
Approximately 155 investment advisers managing over $2 billion in private equity fund assets may represent roughly 75 percent of the U.S. private equity fund industry, so a small number of filers covers most industry assets. 2016
Form PF data from the SEC Risk and Examinations Office for the fourth quarter of 2014 show net asset value of about $3,399 billion for hedge funds, $2,672 billion for Qualifying Hedge Funds, and $1,744 billion for private equity. 2016
A 2013 survey found that Form PF compliance costs for first time filers were under $10,000 for 59.18 percent of respondents, while subsequent annual Form PF filings cost no more than $5,000 for 57.14 percent of respondents. 2016
Industry concerns about the burdensome nature of Title IV's mandatory private fund adviser registration and disclosure requirements appear mostly unfounded, although data inconsistencies remain a concern. 2016
The largest group of respondents prefers an assets under management size between $500 million and $1 billion, and no clear majority preference emerges around the $1.5 billion Form PF quarterly reporting threshold. 2016
A majority of adviser respondents, 66.7 percent, did not take the $1.5 billion Form PF quarterly reporting threshold into account when determining the appropriate assets under management for the funds they manage. 2016
The SEC's clarifying and optimizing of the legal framework after the Dodd-Frank Act effectively supports the private fund industry in its efforts to comply with the revised standards. 2016
The same SEC implementation and clarification of Dodd-Frank registration and reporting requirements that helps the industry comply also creates uncertainty and higher costs for it, so continuing rule development cuts both ways. 2016
The proliferation of unconstrained mutual funds calls into question whether the retail investor protections built into the Investment Company Act of 1940 remain effective. 2016
Unconstrained mutual funds share multiple investment strategy and risk attributes with fixed income hedge funds, a finding the authors ground in trading data and prospectuses of all such funds launched from 2010 through 2015. 2016
The authors stipulate that an unconstrained mutual fund strategy is generally not tethered to any benchmark and instead gives the manager operational freedom to pursue risk-adjusted returns using any debt instruments or securities, regardless of issuer, sector, jurisdiction, liquidity, or quality. 2016
Unconstrained mutual funds combine the regulatory structure of a mutual fund with the investment strategy of a private fund implementing a credit strategy and principally trading fixed income instruments, which lets them transcend traditional investment and legal distinctions. 2016
The emergence of unconstrained mutual funds is driven by market forces: post-crisis structural and regulatory changes to the capital markets, a low interest rate environment, and the growth of private funds together created and then increased retail demand for alternative mutual funds. 2016
Unconstrained mutual funds have not delivered superior performance: Morningstar data for funds with three years of investing history offer no evidence that they outperform mutual funds in comparable asset classifications. 2016
Average unconstrained mutual fund performance over the three years preceding the study was lower than the return on the ten-year Treasury, and poor performance was often accompanied by high fees and increased credit risk. 2016
If a private fund's offering process successfully limits its investors to accredited investors or qualified purchasers, the retail investor protection principles of the Company Act do not apply to the fund's trading, operation, and governance. 2016
Unconstrained mutual funds are proliferating at a significant rate, growing steadily since 2007, with the overall trend between 2010 and 2015 showing a steady increase in launches. 2016
The high turnover rate of unconstrained mutual funds distinguishes them from other mutual funds and makes them directly comparable to private funds, which typically trade at high levels. 2016
Unconstrained mutual funds engaged in almost 50 percent more futures contract transactions than other mutual funds, and the overall scope and nature of their derivative use is consistent with what the authors would expect of a private fund. 2016
Because unconstrained mutual funds share investment strategy and risk attributes with private funds, the average unconstrained fund's risk profile is substantially more complex and generally involves more risk than the average mutual fund, and is closer to that of a private fund. 2016
Unconstrained mutual funds take on private fund-like risk without a corresponding return advantage: private funds' incentives and investment flexibility help explain their performance advantage over mutual funds, but the performance record of unconstrained mutual funds is less clearly distinguished from that of other mutual funds. 2016
The Company Act's retail investor protection policies do not take sufficiently into account the investment strategy and risk attributes that unconstrained mutual funds share with private funds. 2016
Private fund advisers' increasing use of blockchain technology, artificial intelligence, and big data is a distinct source of downward pressure on the traditional 2/20 fee structure that commentators have not examined. 2017
The majority of private fund advisers that deploy blockchain technology, artificial intelligence, and big data in their operations or strategy charge their investors lower fees, even though not all blockchain enabled funds charge per transaction fees. 2017
Using a hand coded dataset of 98 private investment fund advisers that use blockchain technology in their strategy or internal operations, the article shows that advisers using the new technology are able to charge overall lower fees. 2017
The historical private fund management fee of 2% has shifted in recent years to roughly 1.0% for new managers and 1.5 to 1.8% for established managers with an adequate track record. 2017
In the Buffett and Seides wager on net of fee returns, the passive S&P 500 index position produced a 7.1% compounded annual return after nine years against 2.2% for the five hedge funds of funds, evidence that industry performance does not justify the 2/20 fee structure. 2017
Private investment fund management fees deviate from the market rate of 1.5% to 2% of the fund's capital commitments because affiliates and other employees of the investment manager who invest in the fund are not charged management fees. 2017
Pressure on the incentive fee side operates through blackened carried interest, under which a manager cannot collect carry until all limited partners have had their capital returned within the lifetime of the private equity model. 2017
The current legal and administrative processes that support private equity are time consuming, expensive, lack transparency, and involve lengthy, duplicative, and fragmented investment and administrative processes. 2017
A blockchain program for private equity administration allows all involved parties in an equity deal to look at a single compiled version of the transaction and all other data relating to the deal, replacing the reconciliation of multiple document copies. 2017
Blockchain based fund reporting substitutes verifiable transparency for hedge fund secrecy: the LendingRobot ledger shows detailed holdings and supplies a hash code signature as evidence that the data is tamper proof. 2017
A blockchain enabled fund delivers performance competitive with traditional funds: LendingRobot claims average performance of 6.86% to 9.66% depending on strategy, against an average 8.89% annualized return for a broad range of traditional hedge funds as of March 2017. 2017
The rise of blockchain applications in private investment funds can exacerbate the industry's already changing fee structure. 2017
The SEC's reasoning against the Bitcoin exchange traded fund does not transfer to blockchain based private investment funds, because such funds trade a diverse array of cryptocurrencies rather than Bitcoin alone and reach a much narrower investor audience, which curtails investor risk. 2017
Blockchain removes the reconciliation problem in private equity administration by letting every party to a deal view a single compiled version of the transaction and its associated data, instead of reconciling multiple copies of deal documents. 2017
Private fund management fees have compressed materially: the historical two percent of commitments has shifted in recent years to roughly 1.0 percent for new managers and 1.5 to 1.8 percent for established managers with an adequate track record. 2017
The study rests on a hand coded dataset of 120 private investment funds that use blockchain technology in either their strategy or their operations, compiled by the author and research assistants from web searches and multiple databases. 2017
Regulatory guidance is essential to the continuing evolution and blockchain integration of the private investment fund industry, so the constraint on further adoption is regulatory rather than technological. 2017
The IRS confined its virtual currency position to transactions in convertible virtual currency, which leaves the tax treatment of crypto limited partnership interests unaddressed. 2017
Fund type composition diverges across regions: in the United States hedge funds dominate the blockchain using sample, while in Europe venture capital funds clearly predominate. 2017
The Northern Trust and IBM blockchain program removes the need for parties to reconcile multiple copies of deal documents by letting every party to a private equity deal look at a single compiled version of the transaction. 2017
The Investment Advisers Act safe harbor let an adviser count an entire legal organization as one client, provided the advice followed the organization's objectives rather than those of its individual owners, which is what allowed advisers to manage money for hundreds of underlying investors while staying exempt. 2017
The 2004 registration rule failed in court because the term client was not defined in the Investment Advisers Act, leaving the SEC without authority to fix its meaning, and the D.C. Circuit vacated the rule in Goldstein as arbitrary rulemaking. 2017
Under PFIARA, private investment fund advisers with more than 150 million dollars of assets under management must register as investment advisers and disclose information about their trades and portfolios to the SEC. 2017
The private fund industry's central fear about Form PF was not the filing itself but eventual publicity: if the disclosures ever became public, competitors could reverse engineer fund strategies and largely eliminate managers' ability to generate absolute returns. 2017
Some Form PF disclosure requirements are not answerable as designed, because counterparty credit exposure is sensitive information that individual private fund managers often cannot readily determine. 2017
Because advisers and third party service providers can flatten out and sanitize the information disclosed in Forms ADV and PF, the resulting disclosures may be less useful to the FSOC and the SEC in determining the systemic risk posed by private funds. 2017
The SEC's private fund data collection encountered accuracy and consistency problems that hampered the FSOC's ability to evaluate the systemic risk of private funds. 2017
The FSOC relied most heavily on some of the most problematic disclosure items the SEC collects, even though SEC data played a crucial role at every stage of its systemic risk assessment of private funds. 2017
Form PF data suffer from core shortcomings: ambiguity in several key questions, inaccurate definitions with correspondingly insufficient SEC guidance, and difficulty aggregating the required information. 2017
Several core Form PF questions that feed the FSOC's stage one threshold assessment are defective, most importantly because the definition of RAUM required substantive interpretation by the filers themselves. 2017
If the FSOC relies on Form PF data that is subject to inaccuracies, because uncertain filers complete the form using estimates and assumptions, then the FSOC's own work on private funds may in turn be subject to errors. 2017
The threat of public disclosure of systemic risk filings through the bankruptcy process only marginally affected hedge funds' tactics and their role in distressed investing, because disclosure obligations under the Dodd-Frank Act remained generic and unstandardized. 2017
Since 2010 private fund advisers increasingly engaged in investor due diligence partly to protect themselves from investor criticism and lawsuits, rather than in response to regulatory mandate. 2017
The absence of due diligence standards traces to private funds' unique market position: unlike mutual funds, private funds evolved as unregistered entities free from most regulatory oversight, so their investor due diligence also evolved without oversight. 2017
Confluence runs in both directions: mutual funds are becoming more like hedge funds as a matter of investment strategy, while hedge funds are becoming more like mutual funds as a matter of regulatory framework. 2017
Unconstrained mutual funds carry private fund style investment strategies inside the regulatory framework of a traditional mutual fund, and they are widely offered to retail investors who would otherwise be excluded from private fund investments. 2017
The proliferation of unconstrained mutual funds calls into question the effectiveness of retail investor protections under the Investment Companies Act of 1940, because shares in funds that carry private fund strategies and risks may be bought by retail investors with limited or no investment experience. 2017
Hedge fund managers adopt emerging technology because it converts into a fee premium: technology driven outperformance makes them more competitive than other funds and financial institutions, which in turn lets them charge higher fees. 2019
The traditional 2 and 20 fee model has become increasingly difficult to justify, and embracing modern financial products is what allows managers to produce returns that still support that model. 2019
Easier access to trading data and to information about the hedge fund industry has been a significant factor in the growth of hedge fund assets, because analytic platforms let managers manipulate peer and style data and build targeted marketing materials. 2019
Systematic, computer model driven funds do not reliably outperform human managed funds: research finds the typical systematic fund does not always perform as well as funds run by human managers. 2019
Hedge funds that base their strategies on artificial intelligence have delivered better results than the industry average over the preceding five years. 2019
The Northern Trust and IBM blockchain removes a specific inefficiency in private equity deal practice by letting all involved parties in a deal look at a single compiled version of the transaction and all data relating to it, rather than reconciling multiple copies of the deal documents. 2019
Blockchain-based funds can invert the traditional secrecy of hedge funds: the LendingRobot ledger discloses detailed holdings and supplies a hash code signature evidencing that the data is tamper proof. 2019
Direct hedge fund regulation faces a two sided trap: strong direct rules push hedge funds offshore where they escape regulation altogether, while weak rules leave investors without adequate protection. 2019
Moral hazard in hedge fund lending persists even when the lender is fully informed, because high enforcement costs can make prevention too costly for the lender. 2019
Hedge fund secrecy is not incidental but competitively necessary: the less the market knows about a fund's activities, the easier it is for the fund to compete and generate the returns clients demand. 2019
Indirect regulation of hedge funds attains most regulatory objectives while still leaving the industry the operating freedom it needs, which makes it preferable to the direct alternatives. 2019
LTCM was diversified across markets but not across strategy, so its positions failed together; market level diversification does not imply strategy level diversification. 2019
The same leverage that produced LTCM's high returns magnified its losses, so leverage is a symmetric amplifier rather than a one directional source of performance. 2019
Hedge fund disclosure to counterparties and investors relies on balance sheet concepts that are uninformative about the actual nature of market risk and credit risk exposures. 2019
Banks continue to find hedge fund business desirable because hedge funds take risks other participants will not, borrow heavily and pay a premium for borrowing, which sustains the lending relationship despite its dangers. 2019
There is currently no precise formula for devising effective integrated prudential hedge fund regulation, so the prudential model remains underspecified. 2019