PwC predicts more hedge fund controls

In its newly released sixth annual global hedge fund whitepaper – ‘Operational Risk: an alternative challenge’ – PricewaterhouseCoopers (PwC) is predicting regulatory pressure will induce the hedge fund industry to be more transparent to its investors about its operational controls.

Graham Phillips, PwC European hedge fund practice leader, said market volatility meant the operational control environment ‘must be sufficiently robust to withstand proper scrutiny’, particularly from instituteional investors.

‘In fact, we expect to see many more requests of hedge fund managers to provide formal reports on controls, in the same way as traditional asset managers have provided to their institutional investors for many years,’ he said.

Robert Mellor, PwC UK financial services tax leader, predicted tax liabilities would move centre stage: ‘Recent regulation, US congressional enquiries and pressure to adopt governance standards, have all increasingly challenged investors to consider and understand the tax issues associated with their underlying investment. Funds in many territories are voluntarily adapting to the standards of FIN48, one of the most significant developments on the tax scene.’

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