Evolving Demands on the Hedge Fund Administration Industry

| Point of View

Changing demands witnessed by the hedge fund industry since 2007

Hedge funds have gained significant prominence and acceptance across both high net worth individuals and institutional investors. However, the robust growth of the hedge fund industry came to an abrupt halt between 2007 and 2008 due to the severe downturn in the market value of assets and the large amount of redemptions by customers. The slowdown of 2007 exposed the complexity of the investment strategies deployed by hedge funds and the weakness of their internal controls. During this period, hedge funds were coming to terms with the changing profile of the client base, especially the rise of institutional investors. The operational complexity of hedge funds has increased due to new demands from institutional investors such as frequent reporting, third-party portfolio valuation, an emphasis on internal controls, increased product complexity, and emerging regulations.

This paper reviews the challenges faced by hedge funds and recommends strategies to address them based on the maturity and size of the fund.