Last-Minute Test Prep for Hedge Funds: How Dodd-Frank Created a Cottage Industry
- By Kevin Roose
It can seem, at times, like even the most enlightened minds in New York’s financial services industry are raging mad about Dodd-Frank and the confusing regulatory regime it has ushered in.
But Doug Schwenk, a former hedge fund COO, has welcomed Dodd-Frank’s miles of red tape with open arms.
“God bless the government,” Schwenk says wryly.
Schwenk’s enthusiasm can be traced to the lucrative cottage industry that the company he founded, Advise Technlologies, has found in guiding hedge funds and other private investment firms through the labyrinthine process of filling out their Dodd-Frank–mandated paperwork.
The big money-maker for Schwenk’s firm these days is Form PF, a 42-page disclosure that requires large hedge funds to give up granular details about their funds’ investments. Advise’s services, which center on a customized software suite that allow clients to file Form PF online, can cost a single hedge fund up to $250,000.
The looming Form PF deadline (filings are due next Wednesday) has kept more than a few hedge fund managers off the beach this summer, and made Schwenk into something of a last-minute SAT tutor.
“A lot of these guys are freaked out,” Schwenk said. “This is the first time they’ve ever reported something this serious to the regulators. It’s crunch time, and all the kids put off their homework.”
Hedge funds have traditionally been black boxes, with not much known about their inner workings save a few quarterly SEC disclosures. That all changed with Form PF, which requires funds with more than $5 billion in gross assets to give the the government a full annual rundown of what’s on their balance sheets, and how they invest. Things like: How big is their position in gold? How much of their debt is unsecured? Who are their Eurozone counterparties?