Kaal claims by topic: private-funds

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

A uniform approach to hedge fund valuation is not possible because the variety of hedge fund investments and strategies means some positions, such as non-concentrated positions in liquid securities, are far easier to value than others. 2009
Valuation is very likely to become the next major issue for the hedge fund industry, because most jurisdictions lack regulatory oversight of valuation and the industry generally lacks self-discipline and internal controls. 2009
When hedge funds adopt private equity strategies by adding private companies to their portfolios, they exacerbate valuation problems, and the convergence of the two asset classes makes it more difficult to accurately assess the value of each. 2009
Post-1998 hedge fund regulatory proposals were misdirected because LTCM was unique among its peers in leverage, position size, and market-making ability, so the proposals mostly addressed LTCM as a single case rather than the range of issues affecting all hedge funds. 2009
The regulatory proposals that appeared soon after LTCM did not adequately take valuation problems into account. 2009
Sequential triggers invite manipulation of the triggering events and abusive practices such as asset stripping near bankruptcy, a risk the contract or corporate charter can counter by imposing a mandatory holding period on contingent capital securities. 2011
Because hedge funds play a large role in the credit derivatives market and that market recently failed, an increased regulatory emphasis on banks' lending exposure to hedge funds is justified. 2011
Hedge fund managers subjected to stricter rules in one jurisdiction while competing with funds in less restrictive jurisdictions could be placed at a comparative disadvantage. 2011
If regulators lack the resources to protect against systemic risk, hedge fund regulation could be futile. 2011
Regulators who obtain hedge funds' proprietary information could inadvertently pass it to third parties, and because that information is highly valuable to competitors in the same markets, such leakage could undermine trading strategies and the long-term viability of hedge funds. 2011
Because hedge fund trading strategies depend on confidentiality, required disclosures that let other market participants trade along or anticipate a fund's transactions can negatively affect the fund's absolute returns. 2011
The SEC would be better advised to interpret the rulemaking authority it received from Congress than to increase requirements on hedge funds in order to address concerns over potential systemic risk. 2011
Because the AIFM Directive exposes depositaries to strict liability in certain circumstances, depositaries must weigh the risks and benefits of serving EU alternative investment funds, and a negative assessment would harm the depository business and, implicitly, hedge funds. 2011
Although hedge funds manage only a small proportion of the investment universe compared with banks, they do manage a proportionally large part of complex financial instruments such as CDOs and other derivatives. 2011
British Bankers' Association data show that since 2000 hedge funds steadily increased their share of the credit derivatives market while banks' role in that market progressively declined. 2011
Legislators had disincentives to impose harsher requirements on the hedge fund industry before the crisis, because harsher regulation could have driven franchise taxes and other business to offshore centers. 2011
Without the threat of systemic risk and without a clear delineation of the social externalities that hedge funds cause, the purpose of direct hedge fund regulation is unclear. 2011
Registering hedge funds with regulators and requiring disclosure of pertinent information could help minimize the moral hazard, social externalities, and systemic risk generated by the hedge fund industry. 2011
Freedom from supervision and disclosure obligations was functional rather than incidental for hedge funds: it enabled successful fund launches, helped generate higher returns, and attracted investors, which is why manager registration is contested. 2012
The immediate deregistration of hedge fund advisers following Goldstein v. SEC is revealed-preference evidence of the industry's opposition to registration and disclosure requirements, not merely a technical response to the vacatur. 2012
Before Dodd-Frank the perimeter of hedge fund regulation was set by SEC no-action letters on client counting and by courts that gave very limited and sometimes contradictory guidance, so compliance rested on an unstable and uncertain base rather than on rules. 2012
Revised Form ADV requires advisers to report gross rather than net regulatory assets under management and narrows their discretion to include or exclude assets, so the registration threshold becomes harder to manage down through reporting choices. 2012
Form PF reporting achieves broad coverage of systemic exposure with narrow coverage of firms: the SEC expects the small set of large filers to account for eighty percent of total hedge fund assets under management in the United States. 2012
Quarterly rather than annual Form PF updating for large hedge fund advisers is designed for timeliness: its purpose is to give the Financial Stability Oversight Council data current enough to identify emerging trends in systemic risk. 2012
This Article reports the first survey study of hedge fund advisers conducted after the SEC's registration effective date, drawing on a population of 1267 private fund advisers who registered before March 30, 2012. 2012
Persistent multi-channel follow-up, by fax, e-mail, and telephone, yielded ninety-four completed surveys, a 7.42% response rate from a population of 1267, which is substantially higher than response rates in prior surveys of this industry. 2012
Mandated disclosure does not automatically produce usable public data: although Form ADV requires advisers to disclose chief compliance officer contact information, the SEC dataset omitted it and contained no e-mail addresses, so researchers could not reach the officers responsible for compliance. 2012
Comparison of the responding sample against the full registered population on Form ADV parameters shows the sample is not biased toward any particular subgroup of hedge fund advisers, and gives no indication that respondents differ from nonrespondents. 2012
A majority of surveyed advisers, 72.09%, do not plan any strategic response to the Dodd-Frank Act registration and reporting requirements. 2012
Compliance with the registration and disclosure requirements cost a majority of surveyed advisers between $50,000 and $200,000, while a significant minority estimated total compliance cost from $200,000 to over $400,000. 2012
The time burden of complying with all federal rules applicable to hedge fund advisers has a median of 500 hours per year, with three quarters of respondents at 750 hours or less and a quarter above that, so the burden distribution is skewed rather than uniform. 2012
The Form PF quarterly reporting threshold of $1.5 billion in assets under management is not a binding sizing constraint for most advisers: 80.46% would not take it into account in determining fund size, while 19.54% would. 2012
Where the Form PF quarterly reporting threshold does influence behavior, it distorts fund size downward: a majority of the advisers who take the threshold into account plan to stay under $1.5 billion in assets under management, and some would close funds to new investors to do so. 2012
Registration and disclosure did not push advisers to change what they invest in: only 2.44% of respondents said they would have to change strategy significantly over five years, while 4.88% expressly reported no strategy change. 2012
Respondents identified the creation of barriers to entry as an industry level effect of the registration and disclosure requirements, because the rules make the market environment for private funds less attractive to new entrants. 2012
Despite documented cost concerns, the hedge fund industry appears to be only modestly affected by the Dodd-Frank reporting and disclosure requirements and is adapting well to the new regulatory environment. 2012
Quick absorption of registration costs does not settle the policy question: even if advisers absorb the reported cost implications relatively quickly after registration, the long-term cost implications of registration and reporting obligations could still affect the private fund industry. 2012
Mandatory reporting does not guarantee informative reporting: anecdotal evidence indicates that advisers can present the information required in Forms ADV and PF in ways that in effect flatten out and sanitize the disclosures. 2012
If advisers sanitize their Form ADV and Form PF filings, the disclosures become less useful for FSOC and SEC evaluation and undermine the very determination of systemic risk posed by private funds that the reporting regime was built to enable. 2012
There is a substantial overlap between the systemic risk disclosure requirements imposed on hedge fund advisers under Title IV of the Dodd-Frank Act and the disclosure requirements under the fully revised version of Bankruptcy Rule 2019. 2013
Under the regulatory framework in place at the time of writing, the threat that hedge funds' systemic risk filings could be publicly disclosed through the bankruptcy process will affect hedge funds' tactics and their role in distressed investing only marginally. 2013
Hedge funds' distressed and default debt investments in the United States grew dramatically over two decades, rising from roughly $70 billion in 1998 to roughly $867 billion in 2007. 2013
The proliferation of distressed-focused hedge funds gave hedge funds roughly one quarter of the total distressed-debt market and made the distressed-focused approach the fifth-largest hedge fund strategy. 2013
The threat of systemic risk disclosure, combined with rising competition in the distressed-debt market, could further incentivize hedge fund managers to cooperate in the bankruptcy process. 2013
The SEC has not standardized the disclosures required in Form PF, and there is evidence that Form PF requirements rest on an inconsistent use of industry terms, which can in turn produce inconsistent and contradictory data reporting. 2013
Because creditor disclosure obligations in bankruptcy are minimal and a general statement of the type of claim often suffices, hedge funds' penchant for secrecy carries over into the bankruptcy process even when they participate as debt holders. 2013
Systemic risk reports filed by registered investment advisers are confidential and are not publicly available, so any effect of these filings on bankruptcy practice depends on the prospect of disclosure rather than on actual public access. 2013
Mandatory quarterly Form PF reporting for large hedge fund advisers is designed to give the Financial Stability Oversight Council timely data for identifying emerging systemic risk trends and to align United States practice with international trends. 2013
Under both the bankruptcy and the systemic risk disclosure regimes, filed data carries a serious risk of being out of date and less accurate at the time it is analyzed than when it was disclosed, partly because of the lag needed to collect data before filing. 2013
Form PF's required disclosure of a reporting fund's strategies includes a separate subcategory for event driven, distressed and restructuring strategies, which is what makes the form potentially relevant to bankruptcy proceedings. 2013
Form PF disclosures have not been standardized, and anecdotal evidence indicates that the SEC and the FSOC may be working with contradictory, misleading, inaccurate, and incomplete systemic risk data. 2013
Because the SEC is still working out the appropriate use of Form PF and still improving the form and its instructions, its enforcement division is unlikely to open investigations into alleged misreporting or failures to report. 2013
Form PF's systemic risk disclosure obligations were created, in a non-bankruptcy context, precisely to counteract the kind of shadow activity that is now resurfacing in bankruptcy under Revised Rule 2019. 2013
The overlap between hedge fund adviser disclosures under Revised Rule 2019 and systemic risk disclosures under Form PF, combined with the uncertainties Revised Rule 2019 created, points to a possible future role for systemic risk disclosures in bankruptcy. 2013
Form PF disclosures in their existing format are too generic to be appropriately applied in bankruptcy, but accumulated experience with the form and standardization of its items could yield less generic disclosures that become increasingly relevant to bankruptcy over time. 2013
If Form PF systemic risk data became publicly available, or even only available to the presiding bankruptcy judge in a chapter 9 or chapter 11 case, the hedge fund industry's strong preference for secrecy could itself precipitate a change in distressed investment practices. 2013
The threat that hedge fund managers' systemic risk filings could be publicly disclosed could help incentivize hedge fund investors to abstain from trading while serving on a creditors' committee and to avoid holding multiple offsetting positions in distressed entities. 2013
Disclosing otherwise private and proprietary Form PF systemic risk data exclusively to bankruptcy judges could alleviate the hedge fund industry's concerns about privacy and about the reverse engineering of its strategies and positions. 2013
Because systemic risk disclosures are far more generic and are not tailored to any specific distressed investment, importing them into bankruptcy would improve only marginally the information available about the motives of distressed securities investors. 2013
Systemic risk disclosures in the bankruptcy process would also not significantly change or limit hedge funds' influence in that process, nor would they protect against the misuse of confidential information. 2013
There is a real risk that increased disclosure through Form PF would destroy the balance of power in the restructuring process. 2013
Bankruptcy judges and the parties to a bankruptcy case may be unable to adequately evaluate Form PF data pertaining to a creditor, which limits the usefulness of that data in bankruptcy. 2013
Using generic and possibly outdated systemic risk data in the bankruptcy process would not improve hedge funds' bankruptcy practices in the near term. 2013
The Investment Advisers Act prohibits contingent fee arrangements between investment advisers and their clients because such arrangements could induce inappropriate risk taking by the adviser. 2013
Exemption from registration under the IAA does not exempt an adviser from the antifraud provision, which reaches both negligent misstatements and misstatements made with intent to defraud. 2013
Investment adviser status under the IAA requires that the advice concern a security; without a security in the dealings between adviser and client the statutory definition does not apply. 2013
Providing investment advice without compensation makes a person less likely to fall within the IAA definition of investment adviser, but the SEC construes compensation for advisory services broadly, which narrows the practical value of that limit. 2013
The frequency of advice helps determine adviser status: advice rendered occasionally, rarely, and in a non-periodic fashion makes classification as an investment adviser less likely. 2013
Advisers with more than $150 million in regulatory assets under management are defined as large private fund advisers and must register with the SEC. 2013
Registering large private fund advisers works by increasing the volume of data available to regulators, which in turn may help protect against systemic risk. 2013
The pre Dodd-Frank exemption for advisers with fewer than fifteen clients failed as a regulatory boundary because most hedge fund advisers deliberately designed their operations and legal structures to fit within it and thereby escape SEC registration and supervision. 2013
The Title IV threshold registration requirement pulls a majority of the hedge fund advisers who had previously relied on the fewer than fifteen clients exemption into SEC registration. 2013
Part 2 of Form ADV requires a plain English narrative brochure for prospective advisory customers, making the brochure the primary disclosure document delivered to an adviser's clients. 2013
Mandatory disclosure of referral compensation, related person status of brokers and dealers, and soft dollar benefits is designed to defuse conflicts of interest arising when an adviser runs several types of business and services. 2013
Form PF was created to improve SEC and CFTC investigations and examinations and to enable the Financial Stability Oversight Council to monitor systemic risk in U.S. financial markets. 2013
Form PF filings, unlike Form ADV filings, are confidential and not publicly available, so the systemic risk disclosure regime is built for regulators rather than for market or investor scrutiny. 2013
The frequency of Form PF reporting is keyed to size: advisers with at least $1.5 billion RAUM attributable to hedge funds must update quarterly, while advisers below that level file only annually. 2013
Quarterly rather than annual reporting by large private fund advisers is intended to give the FSOC data timely enough to identify emerging systemic risk trends. 2013
Form PF requires disclosure of the reporting fund's positions and how long it would take to liquidate them, because the SEC needs a view of portfolio liquidity rather than positions alone. 2013
The SEC mandated written compliance policies and procedures for investment advisers as a reaction to mutual fund industry scandals and in an effort to curb IAA violations. 2013
The IAA bars compensation tied to the performance of the client's account but permits compensation tied to the average value of the client's assets, so fee regulation targets performance linkage rather than asset based fees. 2013
Title IV of the Dodd-Frank Act represents the most significant regulatory change in the history of the hedge fund industry, imposing mandatory adviser registration and disclosure for the first time since the industry's inception. 2014
Contrary to the hedge fund industry's claim that increased supervision and disclosure would harm profitability, the authors find statistical evidence that the Dodd-Frank Act requirements had a positive effect on hedge fund performance. 2014
The hedge fund adviser registration requirement under the Dodd-Frank Act creates a discontinuity in hedge fund returns at the registration effective date of March 30, 2012. 2014
Strategic behavior by fund advisers around the assets under management registration threshold produces a strong increase in the measured discontinuity at that threshold. 2014
Dodd-Frank Act compliance costs reduce the profitability of hedge fund advisers' investment management companies, but registration and disclosure requirements do not appear to reduce the returns of the hedge funds themselves. 2014
Analyst estimates place the annual cost of Dodd-Frank Act registration and disclosure compliance for hedge fund advisers in a range from $50,000 to $400,000 per year. 2014
Hedge fund adviser registration under the Dodd-Frank Act positively affects adviser returns in March 2012, but the effect does not persist in the months after the registration effective date. 2014
The authors find no empirical evidence that hedge fund adviser registration under the Dodd-Frank Act negatively affects hedge fund performance, contradicting the industry's claims. 2014
No prior study had analyzed the performance implications of hedge fund adviser regulation, making this the first estimate of the causal effect of the Dodd-Frank Act registration requirement on hedge fund returns. 2014
Because hedge funds developed under little or no regulatory supervision before the Dodd-Frank Act, the existing hedge fund performance literature largely fails to assess the implications of hedge fund regulation. 2014
The quarterly Form PF reporting obligation imposed on hedge fund advisers with more than $1.5 billion in regulatory assets under management is designed to give the FSOC timely data for identifying systemic risk trends. 2014
The working sample consists of 2,145 hedge funds drawn from Morningstar data on roughly 7,000 hedge funds and more than 3,700 advisers, retaining only funds reporting complete monthly earnings and AUM from January to October 2012. 2014
Only about a fifth of the sample funds exceed the $150 million AUM registration threshold: roughly 79 percent of the 2,145 funds are below it, 17 percent are consistently above it, and 4 percent float across it. 2014
Most of the 87 strategic funds keep their AUM very close to the $150 million disclosure threshold, oscillating around it rather than moving decisively above or below it. 2014
In simple linear regressions of monthly returns on log AUM across the full sample, the AUM coefficient is statistically significant at the 5 percent level only during March through August 2012. 2014
In the period close to and following the registration effective date, fund size has a positive relationship with fund performance, with positive beta coefficients in March through May and July 2012. 2014
Under the sharp regression discontinuity design, the estimated treatment coefficient exceeds one only in March 2012, at 1.104 with a p-value of 0.015, and is close to zero and insignificant in every other month. 2014
The March 2012 discontinuity coefficient is the only estimate with a p-value below 5 percent; all subsequent monthly estimates are statistically insignificant. 2014
The discontinuity in hedge fund earnings at the registration effective date is positive, which is the opposite of what the hedge fund industry expected the Dodd-Frank Act to produce. 2014
The March 2012 discontinuity effect is not persistent and is completely absorbed in the months following the registration effective date for private fund advisers. 2014
Unlike the entire sample, whose discontinuity coefficient is near zero except in March 2012, the strategic subsample shows a discontinuity coefficient that is always above zero across the sample months. 2014
The difference-in-differences interaction term identifying treated funds in 2012 is positive and statistically significant in March, April, and May 2012. 2014
Despite the great volatility of hedge fund adviser returns over the observation period, the empirical evidence for a discontinuity at the $150 million AUM threshold is robust, but the discontinuity does not persist beyond the registration effective date. 2014
The finding that Dodd-Frank Act registration does not depress hedge fund returns is consistent with prior evidence that higher administrative costs are only a second-order effect of the regulation. 2014
The SEC's collection of proprietary hedge fund data through Forms ADV and PF does not negatively affect the performance of the hedge fund industry as a whole, and appears to affect only a subset of the industry. 2014
Title IV of the Dodd-Frank Act and the SEC rules implementing it produced a paradigm shift in United States private fund regulation, raising regulatory oversight of an industry that had been largely exempt to unprecedented levels. 2014
The Form PF filing obligation is triggered by a bright line asset threshold: every registered investment adviser with more than $150 million in assets under management attributable to private funds at the end of its most recently completed fiscal year must file. 2014
Form PF's counterparty credit exposure requirement is difficult to satisfy at the source, because the exposure is highly sensitive information that individual fund managers often cannot readily determine. 2014
If advisers' allegations that Form PF disclosures cannot be answered other than by guessing are correct, then the SEC's capacity to evaluate the data is compromised, and regulation built on incomplete and misleading data will itself be questionable. 2014
Prior scholarship, including the author's own earlier work, established that Form PF created core challenges for the private fund industry but did not clarify what impact the disclosure requirements actually have on managers; this study is designed to fill that gap. 2014
High quality private fund data is scarce because the industry's entrenched interest in confidentiality combined with decades of regulatory exemption from registration and transparency requirements left no reservoir of comparable disclosure to study. 2014
Further randomization of the sample was not available as a remedy, because respondents drawn from outside the private fund adviser population would never have been exposed to the new disclosure requirements and so could say nothing about them. 2014
The near identity between respondents who reported completing Sections 2 through 5 of Form PF and respondents who reported quarterly filing shows the answers are internally consistent, which the author treats as evidence that the survey responses carry above average reliability. 2014
Despite contacting the entire population of 3669 SEC-registered private fund advisers by fax and e-mail over more than five months, the study obtained only 52 respondents, a response rate of 0.014 percent. 2014
Advisers themselves understand Form PF's purpose the way the statute frames it: most respondents identified assessing systemic risk and closing the historical information gap about private funds as the form's purpose. 2014
Initial Form PF compliance was inexpensive for most filers: 59.18 percent of respondents put the total cost of completing Form PF for the first time under $10,000. 2014
Form PF compliance cost is sharply size dependent: quarterly filing large funds spent on average $155,286 on the initial filing, roughly sixteen times the $9,520 average reported by annually filing smaller funds. 2014
Measured against this study's survey data, the SEC marginally overestimated the cost of the initial Form PF filing for both annually filing smaller advisers and quarterly filing larger advisers. 2014
Recurring Form PF cost is also size dependent: quarterly filing large fund advisers pay on average $72,143 for subsequent filings while smaller advisers spend on average $5,262. 2014
For quarterly filing larger private fund advisers, the SEC substantially overestimated the cost of subsequent Form PF filings; the survey's estimate is roughly half of what the SEC projected. 2014
The SEC's error runs in the opposite direction for small advisers on recurring filings: the agency marginally underestimated the cost of subsequent Form PF filings for annually filing smaller private fund advisers. 2014
The SEC's time burden estimates for Form PF are miscalibrated in the same direction as its cost estimates for large filers: the study's data suggest the agency overestimates the hours larger private fund advisers need. 2014
Form PF compliance is not staff intensive for most filers: 67.35 percent of respondents used only one to three individuals and 69.39 percent reported the work took staff less than 50 hours. 2014
The Form PF burden is concentrated in a few identifiable items: respondents ranked Question 16 on types of investors as the most time consuming, followed by Question 17 on performance and Question 7 on related persons. 2014
The dominant driver of Form PF time consumption is data gathering rather than form completion: 36 percent of respondents named data gathering as the task consuming most of their time, followed by delta options and ambiguous questions or unclear instructions. 2014
Asked what the SEC should fix first, respondents named the burdensome nature and the ambiguity of Form PF as the most pressing issues, not the substance of what is disclosed. 2014
Complaints about Form PF's ambiguity coexist with acceptance of its substance: the same majority that flagged ambiguity as the most pressing issue also considered their existing reporting systems adequate and agreed with the SEC's definitions and instructions. 2014
Form PF's definition of leverage is overinclusive: respondents reported that it is inappropriately constructed and sweeps in funds that use neither leverage nor derivative securities. 2014
Regulatory assets under management is an unstable reporting concept: commenters split evenly on whether Form PF's RAUM questions required them to interpret the term in order to answer. 2014
Contrary to the industry's public complaints about SEC support, a majority of respondents rated the best level of SEC staff guidance available for completing Form PF as sufficient or good. 2014
Where SEC guidance failed, the failure was localized: respondents who found guidance inadequate pointed predominantly to Form PF Section 1c, Item B, which concerns information about the reporting fund. 2014
SEC flexibility in answering Form PF questions is valued by filers: 72.92 percent of respondents said the flexibility the SEC provides is helpful. 2014
SEC flexibility helps filers through a specific mechanism: it authorizes advisers to apply their own internal methodologies when interpreting and answering Form PF questions and to state their own assumptions, rather than forcing them onto an unfamiliar measurement basis. 2014
Regulatory flexibility can backfire: a category of respondents reported that the flexibility the SEC provides is not useful precisely because it is unclear and generates confusion. 2014
Most private fund advisers did not need new infrastructure to comply: 65.22 percent reported that their existing internal reporting systems adequately capture the information Form PF requires. 2014
For a substantial minority, existing systems fail Form PF for a specific reason: 34.78 percent of respondents said their internal reporting systems were insufficient because the required answers demand further analysis and calculation beyond what the systems already produce. 2014
Form PF's counterparty disclosure proved far less burdensome in practice than anticipated: 93.75 percent of respondents encountered no difficulty identifying counterparties for the counterparty credit exposure questions. 2014
Because only 27.08 percent of respondents used a service provider to complete Form PF, the widespread concern that outside service providers would overinterpret required Form PF data on filers' behalf appears unjustified. 2014
Working with a service provider imposes its own costs: filers reported that the arrangement requires investing time and money to develop interaction processes and bearing the burden of supplying the provider with the underlying information. 2014
Investor demand for Form PF filings is limited: 74.47 percent of respondents had never been asked by an investor for a copy of their Form PF filing. 2014
Form PF fund performance metrics are not accurate or comparable across filers, because reporting entities employ different calculation methodologies to produce them. 2014
Respondents argued that the SEC's systemic risk objective would have been advanced more directly by asking a smaller set of targeted questions, emphasizing open derivatives positions, the entity's total market exposure, and its total underlying capital. 2014
The measured effect of Form PF data reporting on the private fund industry is milder than the pre-adoption debate predicted. 2014
On the cost evidence collected here for both smaller and larger advisers, the industry's long standing objection that mandatory registration and disclosure would inappropriately burden investment advisers is mostly unfounded. 2014
Most of the identified problems with Form PF are self correcting over time, as the SEC issues additional and improved guidance or revises the core questions and definitions that filers flagged as problematic. 2014
Standardizing private fund adviser reporting obligations is the author's proposed remedy for the shortcomings advisers identified, because standardization attacks the ambiguity and inefficiency in the reporting requirements at their source and simplifies the disclosure regime. 2014
A single standardized reporting model will not suffice: because different types of private fund advisers have competing needs, policy makers should evaluate several different models for standardizing Form PF reporting. 2014
The study's cost findings are bounded to the short run: the data cannot establish what it will cost the private fund industry to keep completing and filing Form PF annually or quarterly over time. 2014
This study finds no evidence of an inverse relationship between the size of regulated hedge fund advisers and the per-unit cost of compliance, contrary to the common complaint that financial regulation brings increasing returns to scale. 2014
The cost of Title IV compliance, and the other independent variables used as proxies for compliance cost, are associated with the size of hedge fund advisers as measured by assets under management. 2014
Anecdotal evidence suggests that Title IV of the Dodd-Frank Act more than doubled the market entry threshold requirements for smaller hedge fund advisers. 2014
Before Title IV, launching a hedge fund could be accomplished by raising roughly $25 to $50 million, whereas after the Dodd-Frank Act the required initial amount may have risen to around $100 million. 2014
Below $100 million in initial assets under management, the administrative cost of running a hedge fund in a post Dodd-Frank environment could be prohibitive. 2014
A disproportionate effect of Title IV on startup hedge funds and smaller advisers could create barriers to market entry and precipitate a trend toward consolidation among smaller hedge fund advisers. 2014
A surplus of larger private fund advisers holding correspondingly larger amounts of assets under management could increase systemic risk, so a regulation that consolidates the industry may work against its own systemic risk objective. 2014
The new regulatory framework for private funds in the United States requires hedge fund manager registration in combination with enhanced disclosure of sensitive proprietary information, a combination that marks a shift in how private funds are regulated. 2014
Because there is no evidence of an inverse relationship between adviser size and per-unit compliance cost, industry concerns over the effect of Title IV compliance cost and possible barriers to entry for smaller funds and startups appear unjustified. 2014
Registered investment advisers must report systemic risk relevant information to the SEC, including trading practices, trading and investment positions, the amount of assets under management, valuation policies, and side letters. 2014
The study's core hypothesis, drawn from the industry view and the anecdotal evidence, is that smaller hedge fund advisers pay more relative to their size than larger hedge fund advisers for Title IV compliance. 2014
Prior work shows that registration and the increased compliance requirements under the Dodd-Frank Act only marginally increase the cost structure of hedge funds. 2014
Form PF is structured so that single strategy fund advisers collect and provide only a fraction of the information a multi strategy adviser must make available, which makes reporting burden a function of strategy count rather than of adviser size. 2014
Because Form PF requires less information from single strategy advisers, hedge fund advisers that apply only a single strategy to their portfolios may incur overall lower compliance cost. 2014
The analysis uses data from a 2012 survey study of a population of 1,264 private fund advisers registered before the SEC's registration effective date for private funds of March 30, 2012. 2014
In the open ended survey question on the effects of Title IV, 43.59 percent of respondents, the largest group, said the industry would be affected predominantly by increased costs. 2014
The majority of survey respondents believed that Title IV compliance costs $100,000.00 annually. 2014
The most common fund adviser response, at 47.67 percent of the 86 respondents to the question, estimates the annual compliance cost of Title IV in the range of $50,000 to $100,000. 2014
On the median annual time measure for Title IV compliance, 46 percent of respondents estimated between 100 and 250 hours per year and 32 percent estimated between 250 and 500 hours per year. 2014
The clear majority of respondents prefer an asset size above the $150 million AUM registration threshold after the enactment of Title IV, indicating that advisers respond to the threshold by growing past it rather than staying below it. 2014
The compliance and administrative costs created by Title IV of the Dodd-Frank Act are associated with the size of hedge fund advisers' assets under management. 2014
Compliance costs per unit of AUM do not diminish in the entire sample or in the multi strategy subsample, so there is no support for the hypothesis that smaller advisers bear relatively higher Title IV compliance cost. 2014
The results contradict other studies finding an inverse relationship between the size of regulated firms and the per-unit cost of compliance, and suggest that financial regulation does not bring increasing returns to scale in the private fund industry. 2014
Financial regulation has disparate effects on private fund advisers in comparison with other financial services providers, so evidence of scale economies in compliance drawn from banking does not transfer to private funds. 2014
The results suggest that the private fund industry may be more robust and less affected by financial regulation than other financial services providers. 2014
While all coefficients are positive in the entire sample and the multi strategy subsample, the negative coefficients in the single strategy subsample suggest that the strategy employed by a hedge fund adviser could change the assessment of the effect of compliance cost. 2014
There is no evidence that private fund adviser regulation in Title IV of the Dodd-Frank Act increases returns to scale, which counters the most damning putative concern raised about regulatory compliance costs. 2014
The SEC data collected from private fund advisers feeds every stage of the FSOC's systemic risk assessment, and the FSOC leans most heavily on precisely those disclosure items that are the most problematic. 2014
Accuracy and consistency problems in the SEC's private fund data collection can impair the FSOC's ability to evaluate the systemic risk posed by private fund advisers. 2014
Prior studies and anecdotal evidence indicate that the data collection mandated by Form PF could itself create problems for the FSOC when it evaluates hedge fund systemic risk. 2014
Even though the private fund industry broadly accepted Form PF, the form's core problems for the SEC are the ambiguity of several questions, advisers' disagreement with the definition of funds, and correspondingly insufficient SEC guidance. 2014
The systemic risk of hedge funds arises principally from the combination of aggressive investment strategies and high leverage with adverse price movements that can dry up credit and depress the market price of collateral. 2014
Hedge funds threaten the financial system through two distinct channels: directly, by damaging systemically important financial institutions, and indirectly, by generating liquidity shocks and raising volatility in key markets. 2014
The 2008 to 2009 financial crisis altered market conditions and the factors driving private fund systemic risk, which triggered a second, distinct wave of scholarship on private funds' systemic implications. 2014
Some estimates place private funds ahead of banks in size and importance during and after the financial crisis. 2014
The unprecedented growth of the private fund industry combined with the low interest rate environment created by post crisis quantitative easing drove private fund managers to reach for yield. 2014
Because private fund advisers supply liquidity and perform liquidity transformation in the manner of banks, the vulnerabilities their bank like activities create can carry large consequences for financial stability. 2014
National regulators reached opposite conclusions on the same question: unlike the OFR, FSB and IOSCO, the United Kingdom's Financial Services Authority concluded from its first comprehensive survey of London's hedge fund industry that the industry poses no systemic risk. 2014
The absence of financial market repercussions from the Amaranth failure suggests that indirect regulation of private funds, achieved by having regulators press banks to limit leverage extended to their fund clients, worked. 2014
Form PF data was tailored primarily for the FSOC rather than for the SEC's own purposes, a design choice that shaped the level of reporting required. 2014
Commonly managed investment funds holding $50 billion or more in aggregate total consolidated assets can be designated systemically important, and following a similar investment strategy across those funds makes designation more likely. 2014
The FSOC's three stage SIFI review process depends heavily on information that private fund investment advisers supply through Form PF. 2014
Form PF information addresses most of the FSOC's stage one thresholds either directly or indirectly, so the mechanical screen runs largely on adviser reported data. 2014
The SEC itself reports that the consistency of investment advisers' responses on Form PF is not ensured and may be questionable. 2014
Advisers take different approaches and make different assumptions when completing Form PF, which the SEC identifies as a further challenge to the usability of the data. 2014
The SEC's initial analysis of Form PF data turned up anomalies attributed to filer error, which prompted SEC concern about the quality of the information private fund advisers report. 2014
Expanding the uses of Form PF data remains difficult so long as there is insufficient confidence in the accuracy of what advisers report, notwithstanding SEC efforts to improve quality through interpretive FAQs and curative amendments. 2014
Form PF data quality and utility are likely to improve over time as filers grow familiar with the form's requirements and calculation methods, because the SEC's experience with the data is still early. 2014
The substantive defects in Form PF data are the ambiguity of several key questions, inaccurate definitions paired with insufficient SEC guidance, and difficulty aggregating the required information. 2014
More than forty percent of respondents in a prior study disagreed with the definitions or instructions in Form PF. 2014
The Form PF definition of Regulatory Assets under Management is the leading example of a definition that forced filers to interpret what they were required to report. 2014