Fund managers are under increased pressure to handle compliance issues as the alternative investing market gets more regulated. The substantial impact of compliance difficulties for Alternative Investment fund managers is shown by recent research by Ocorian and Newgate Compliance, which also reveals a challenging and internally conflicted environment. This article explores the consequences for the industry and looks at the study’s findings.
Compliance concerns leading to loss of Investment Mandates
According to the research, over the previous three years, 81% of Alternative Investment fund managers have lost clients or investment mandates as a result of compliance-related problems. This worrying trend emphasizes how crucial it is to keep strong compliance frameworks in place in order to protect customer confidence and maintain investment prospects.
Escalating conflict between Fund Management and Compliance Teams
According to 90% of respondents, there has been an alarming increase in disagreement between fund management and compliance teams over the last two years, which is another finding of the study. This internal conflict highlights the need for better cooperation and communication inside firms and is a serious obstacle to risk management and regulatory compliance.
Anticipated rise in Compliance Breaches and Risk Profile
Alternative Investment fund managers predict that during the next 24 months, there will be more violations of compliance rules, with 92% of respondents anticipating an increase in both total risk profiles and compliance violations. This gloomy forecast emphasizes how urgent it is to take preventative action to fix compliance issues and lower potential risks.
Importance of Investing in Compliance and Risk Management
Ocorian’s Head of Regulatory & Compliance, Aron Brown, highlights the vital role that compliance and risk teams play in guaranteeing fund managers’ financial success. Brown emphasizes how important it is to fund these groups so they can have the knowledge and tools necessary to successfully negotiate the changing regulatory environment. This expenditure can take many different forms, such as hiring outside compliance providers, updating technology, and educating staff.
Three Lines of Defence Approach to Compliance
To effectively address compliance challenges, alternative Investment fund managers can adopt the three lines of defense approach advocated by regulatory authorities. Establishing rules and guidelines that staff members must abide by, bolstered by extensive training programs, is line one. Line two requires monitoring by specialized compliance officers or teams to guarantee that set procedures are followed. In line three, independent audits are used to evaluate compliance frameworks methodically and spot any possible weaknesses or gaps.
In conclusion, the findings of the Ocorian and Newgate Compliance study underscore the pressing need for Alternative Investment fund managers to prioritize compliance and risk management in today’s increasingly regulated environment. Alternative fund managers may effectively handle regulatory complexities, limit risks, and protect client trust by investing in comprehensive compliance frameworks, promoting collaboration between compliance teams and fund management, and proactively addressing compliance concerns.
