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Increased Regulation Pushes More Funds To Convert to Family Offices

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Hedge fund regulation has been a big issue ever since Dodd Frank was passed. Form PF and the Form ADV Part 2 are hardly trivial. And limited partners are as powerful as ever when it comes to administrative and compliance issues. Increasingly, they wield some big sticks.

In response, more hedge funds seem to be throwing in the towel.

According to the Financial Times, more hedge funds in both London and New York are returning funds to limited partners and restructuring into family offices. George Soros has been the prime example of this. But others seem to be following. Covepoint Capital, a New York-based hedge fund, has taken the plunge. So has Brencourt Advisors.

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To be sure, there are likely some funds that are taking this step to mask other issues, such as performance problems or perhaps fund-raising issues. SAC Capital stands a dramatic example of a fund that may have no choice but to make the transition.

Some might argue that not everyone has this option. It works only if you have enough personal money in your funds and are willing to give up managing external funds, they might say. That said, the notion of a family office these days has morphed. It doesn’t take that much to sustain one, really just a few million.

Obviously, managing your own money doesn’t offer the same rewards. The potential gains are so much bigger if you manage others people’s money. But if the thrill is gone, this offers one way out.

Read more: More hedge funds opt to become family offices – FierceFinance http://www.fiercefinance.com/story/more-hedge-funds-opt-become-family-offices/2013-08-07#ixzz2bPHjHcrM
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