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Hedge fund managers expect rise in compliance costs

Nearly half of hedge fund managers expect a rise in compliance costs this year partly due to concerns that today's Securities and Exchange Commission's (SEC) deadline would be followed by further regulatory measures.

Consulting firm Greenwich Associates found that 49 per cent of hedge fund managers think their costs will rise because "there is a large camp of hedge fund managers and other industry observers who believe that registration is merely the first step in what the SEC envisions as a broader regulatory framework for hedge funds".

From today hedge fund managers must register with the SEC, which drew up the rule in 2004 in a bid to tackle fraud in the industry and improve transparency.

Meanwhile, Paul Atkins, one of the SEC's five commissioners, has claimed the rule will hurt investors. However, Greenwich countered that the registration could be beneficial if the "SEC imprimatur" allowed hedge funds to secure more money from institutional investors, the Financial Times reports.

A recent survey by Ernst & Young found that 85 per cent of hedge fund managers thought the annual compliance costs of the SEC rule would amount to $500,000 or less.

The SEC said yesterday that most of the funds expected to register have filed the appropriate documents.