More Hedge Funds Move to Outsource Compliance in Changing Landscape
Hedge fund managers are increasingly outsourcing compliance and other back-office functions as they seek to trim costs and differentiate themselves in a highly competitive fundraising environment, according to compliance and tax experts.
While hedge funds have long outsourced operations-heavy tasks such as fund administration, they now are looking for support in other areas of their business.
Fund managers that previously avoided outsourcing any of their functions are outsourcing everything from legal and compliance to their chief financial officer and information technology operations, according to David Goldstein, director of fund services at STP Investment Services.
“[For] an emerging manager, especially if they’re a one-, two-, three- or four- person shop, there’s just no way for them to have all the expertise they need in-house,” Goldstein said. “It’s not just running a fund. You’re running a business.”
Typically, managers need to reach a certain size and mass before they are able to hire for certain functions they have outsourced in the past, Goldstein said. However, larger managers also are sticking with outsourcing for compliance and other functions today
“They know that expertise is very potentially better off outsourced,” Goldstein said. “To concentrate in-house, you have the risk of losing that talent potentially. When you go for the outsource model, you have multiple experts on the same topic.”
Read more on David’s comments and other subject matter experts in FundFire here.
