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Our Evolving Hedge Fund Industry

by Preqin

  • 10 Feb 2020
  • HF

The Managed Funds Association (MFA) on keeping pace with the changing regulatory and market environments in the hedge fund industry 

by Jon Hitchon, Managing Director and COO, Two Sigma Chair, Managed Funds Association Board of Directors

  

For years, Preqin’s Global Hedge Fund Report has provided interesting and useful insight into our industry and its investors and this year’s is no different. Over the past year, our industry has continued to grow. Assets under management are near an all-time high and 80% of institutional investors surveyed by Preqin reported that they plan to maintain or increase their allocations to hedge funds over the longer term. And MFA has grown alongside our industry – both staff and revenue have doubled in size. Part of this growth is to help members meet the demands we feel from our client base. Institutional investors are becoming more and more sophisticated.

That is why each year MFA brings together thousands of fund managers, service providers, prime brokers, and institutional investors in the industry’s leading network – a network that is one of the most valuable aspects of our engagement with MFA. The peer-to-peer networking and legal, operational, and compliance training helps us reduce risk, manage costs, and attract assets.

MFA has also taken steps to keep pace with the changing regulatory and market environments by creating three new annual conferences in the past three years alone. At MFA’s inaugural DATA conference in September 2019, speakers from Amazon, Apple, and Microsoft, as well as policymakers and fund managers, discussed the compliance challenges that accompany obtaining, securely storing, and utilizing data.

At that conference, MFA released a report, authored by McKinsey on our behalf, titled ‘The Lifecycle of Data in Context: How Data Proliferation is Shaping Alternatives.’ That paper found that more than 60% of MFA members surveyed believe alternative data will create the potential for additional alpha as data quality and the analytical techniques applied to it improve.

On the advocacy front, MFA worked to encourage regulators to simplify systemic risk reporting mandated by Dodd-Frank. We heard from our members that they were concerned about disclosing sensitive information and worked directly with lawmakers, the SEC, and the CFTC to change this approach.

That work is part of MFA’s far-reaching, on-the-ground advocacy, which is driven by the issues we, as MFA members, identify as priorities. 2020 will be a busy year on Capitol Hill and at the regulatory agencies. We will be active participants in the process – whether it is working to improve the CFTC’s swaps trading framework or contributing to the SEC’s efforts to modernize the Advisers Act advertising rules.

MFA has also worked closely with regulators and policymakers in Europe in support of their goal of deepening capital markets by advocating for regulation that considers the unique nature of investment firms. Our primary concern is that the post-Brexit regulatory framework ensures our members have continued access to investors – and investors have access to our members’ expertise. We have also made clear that any changes to longstanding portfolio delegation rules would threaten that access.

As MFA moves into the future, we are confident our reach and impact will continue to grow in partnership with and in service to our members.

This article is taken from the 2020 Preqin Global Hedge Fund Report. For more expert commentary on the hedge fund  industry, please visit preqin.com/ghfr

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