31 March 2011
Wave of regulation
I have just been to an excellent conference in Malta that is preparing for some of the regulatory changes. It mainly covered UCITS IV and AIFMD. These are only two of the 12 pending regulatory changes that the larger banks are preparing for.
The cost of preparing for these changes is estimated to be $6bn spread among 80 of the larger banks. This doesn't include other banks, fund managers, financial institutions, brokers and fund administrators.
It is no wonder that many PE firms are buying stakes in compliance firms as they will benefit significantly both from preparing companies for the changes and on-going assistance once they have happened. Lawyers will also benefit in advising firms on the required changes as well as fund set up and restructurings for the new environment.
There has been opposition to some of these changes as they are expensive and will cost investors more in terms of lower returns and will stop new asset managers starting as the regulatory burden will be a deterrent. It is clear that the new managers have a higher cost to being in the game and some may not take this risk, especially when it is hard to find liquidity now.
Our role as a fund administrator is to find solutions that can help new managers start their businesses at a lower cost and with less risk while still meeting their regulatory requirements. This will give investors a more diverse product range to allocate to and we hope these managers will become the household names of the future.