News & Analysis

Regulatory enforcement of alternatives down under Trump, says study

Alternative assets managers have experienced a lessening of regulatory enforcement since Donald Trump became President, according to a study by Koger.

-

The enforcement of regulations for alternatives managers has diminished under the Trump administration according to a survey of 200 private equity and hedge fund executives by financial services technology company Koger.

Fifty-six percent of executives at private equity and hedge funds said regulatory enforcement has decreased under the Trump administration. Eighty-five percent viewed the US regulatory environment as more relaxed than it is internationally. Nearly 80 percent of funds questioned for the report said regulatory and compliance issues are now less of a concern than in the past.

“The mandate of the Trump administration generally has been to relax business regulation and this tendency has been evident in the financial sector. In fact, it was reported that in March the US Senate is looking to roll back significant financial regulation passed since the financial crisis. In this overall climate, our study has shown a corresponding decrease in enforcement,” Ras Sipko, Koger’s chief operating officer, told pfm.

The findings are consistent with the shift in focus from private fund manager compliance to retail investors, which was reflected in the recent budget request by the SEC.

Underscoring the uncertainty around enforcement, 73 percent of respondents said that they believe a new administration is likely to strengthen regulatory enforcement in the future.

More than 70 percent of managers cited cybersecurity threats as the biggest risk they are likely to face in 2018, followed by a market correction, feared by just under 70 percent. Sipko said this concern was understandable “given recent data breaches in other sectors.”

In terms of future trends and opportunities, 64 percent of managers reported that they will consider exposure to bitcoin and digital currencies in the coming years.

The study also revealed that 62 percent of firms have hired a data protection officer to comply with the EU General Data Protection Regulation to safeguard consumer and investor privacy.