Accounting Firms Profit From Hedge-Fund Regulation

Aug 25 2014 | 10:19am ET

New international hedge fund regulations are proving a headache for the industry—but a boon for accounting firms.

The so-called “Big Four” accountancies are ramping up their offerings to hedge funds, helping them navigate complex new rules and regulations on both sides of the Atlantic. In particular, the European Union’s new Alternative Investment Fund Managers’ Directive is driving hedge-fund managers to seek more advice from accountants—and driving those accountants to bolster their hedge-fund teams and services.

Among the services now offered are tax and regulatory reporting advice, fund structuring, accounting, auditing and consulting on futures and options, the Financial Times reports.

The growing work coming their way has the Big Four making major hiring pushes. Both Ernst & Young and Deloitte have at least 50 staffers focused on hedge funds in Europe, the Middle East and Africa. PricewaterhouseCoopers has seen its European hedge-fund business grow to more than US$100 million, while KPMG sought to solidify its status as the world’s largest hedge-fund auditor with a deal for Rothstein Kass earlier this year.

“To be a global practice you need the ability to service both the fund and the managers in different jurisdictions, both of which need local support,” PwC hedge-fund head Rob Mellor told the FT.

That has given accountants a large number of ways to penetrate the hedge fund industry. “We’re completely in bed with these guys,” one London-based hedge fund chief operating officer told the newspaper.

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