Who's Afraid of Dodd-Frank? Not Wall Street

From the perspective Hedge fund managers, Dodd-Frank act in many large obstacles. The law requires them to register with the Securities and Exchange Commission, supply reams of sensitive data in a position to trade, prospective investors carefully screen, and then lease compliance officer compliance officer. How all this will not eat into profits and competitiveness hamstring? Now there are some preliminary data to weigh against terror. Wulf Kaal, a law professor at the University of St. Thomas in Minneapolis, has released the first survey conducted fund advisers as part of the law took effect. His findings: Despite grumbling allocation, fund new regulatory burdens quietly. Kaal and his team spoke with 94 people working for private equity, venture capital, real estate, and Hedge funds. Three-quarters of respondents said the new registration and disclosure requirements will not affect their level of investor return. Four-fifths said they did not take the Dodd-Frank into account when determining the size of their funds. And 7 out of 10 said they do not plan to "strategic response" to Dodd-Frank. In other words, the law does not lead them to change their style of investing. "Despite concerns [them], Hedge fund industry appears only slightly affected by the Dodd-Frank reporting and disclosure requirements, and adapt well to the new regulatory environment," Kaal writing. The majority of survey respondents expect the Dodd-Frank operational costs between $ 50,000 and $ 200,000 per year, requiring 500 or fewer hours of work. (A mentor significant outliers, suggesting that the cost of $ 2 million and 4,000 hours of work.) A major source of anxiety for fund managers this summer is the Form PF, invasive questionnaire that comes because for the first time on August 29. Companies to disclose sensitive information about their business with the government. Managers worried that if leaked, it is possible to reverse engineer the strategy, or the funds to see the weakness that rival companies can take advantage. Kaal, though, found anecdotal evidence that companies can answer the question from the perspective of the funds '"such that it applies' even 'and' clean up 'disclosure.'. It is not good for the regulator to the newly created Financial Stability Board administration, one would expect the data to provide a CAT scan of the financial system, exposing the hidden areas of systemic risk. In general, the larger the fund, the easier it is to understand the cost and manpower required to meet the new requirements of the law. "Some of the really big in automating the process, because they are the IT staff to do that," said Kelli Moll, a partner at law firm Akin Gump Strauss Hauer & Feld, the Hedge fund specialist operations. "But the next wave of managers are not so great. And I think they're still struggling. "However, Molly added," Once they get their first confrontation completed, or completed their second confrontation, I think it's not so terrible. People will fix it. "Kaal agree. "The effect of registration and disclosure rules seems much stronger than the industry originally expected," he said concludes.There is one caveat: These preliminary data. "Further research is needed to determine the long-term impact of the Dodd-Frank act as simple as this study shows," the paper said. It is too early to measure the "opportunity cost unresolved due to interference from the core fund management" and what can pass the cost to investors in the form of fees.Make two caveats: There is a possibility that more fund managers responded to the survey told Dodd-Frank expenses, but too buried in the document to get on the phone. Bottom line: In a survey of 94 fund advisers, three-quarters said the new Dodd-Frank regulations do not change the way they do business.