Crisis Changed Hedge Fund Industry

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    The hedge fund industry has undergone significant change since the beginning of the financial crisis, resulting in the need to grow operational infrastructure and increase transparency, says a report by KPMG and the Alternative Investment Management Association (AIMA). ‘The Evolution of an Industry’ says prior to the crisis, the primary source of capital came from non-institutional investors such as high-net worth individuals and family businesses. However, institutional investors are now the leading allocators to hedge funds. This change means hedge funds have had to adapt to the new source of capital and the demands associated with institutional investors ‒ namely the need for a more robust operational infrastructure and thorough terms of due diligence. “The increased due diligence demands of institutional investors are certainly being felt by Canadian managers,” says Peter Hayes, partner, national director, alternative investments, KPMG. “That being said, the Canadian hedge fund market has always been heavily regulated and Canadian managers are well-positioned to meet the increased scrutiny from investors, regulators, and others that many in the global hedge fund space are only just starting to experience.”