Can the government change the rules of the game?

It’s no secret that hedge funds are waiting anxiously for the outcome of new regulations. But market restructuring has caused a major shift of influence from the manager to the investor. Investors are demanding more transparency. In this post-Madoff era, successful hedge fund managers need to start proactively addressing these demands to not only prepare for new regulations, but also increase investor confidence and help attract additional funding.

Many hedge funds have operational weaknesses, and enlightened fund managers know that to counter them will provide reassurance to investors. To cope with increasingly complex reporting requirements (and anticipated growth), it would be a good idea for hedge funds to re-examine their operations to satisfy clients and regulators in a cost-effective manner. One often overlooked benefit is that having lagged behind in regulation scrutiny, hedge funds can now benefit from in-house or outsourced solutions that have been tried and tested at institutions that have already run the regulatory gauntlet.