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Alternative fund managers struggle with compliance 

Alternative fund managers, including private equity fund managers, are losing investment mandates or clients because of compliance issues, according to research from Ocorian and Newgate Compliance, both providers of regulation and compliance services for funds, corporates, capital markets and private clients. 

Ocorian and Newgate Compliance’s global study (across the US, UK, Germany, Brazil, Singapore, Hong Kong, UAE, Turkey, Quatar, Saudi Arabia and Mauritius) involved 101 senior leaders and compliance and risk executives from alternative fund management firms (including private equity, venture capital, real estate, infrastructure, private debt, renewables and hedge funds) collectively overseeing approximately $132.25bn in AUM.

According to the study, some 81% of respondents believe that compliance-related issues within their organisations have resulted in the loss of investment mandates or clients over the past three years.

Over the last two years, the study notes that there has been a noticeable escalation in internal conflict between the fund management team and the compliance and risk team. Over 90% of respondents anticipate further increases in such conflicts over the next three years.

Some 70% of respondents are particularly worried about the risk of non-compliance, as fund managers face growing scrutiny from global compliance regulations, while 92% of participants expect the frequency of compliance breaches and the overall risk profile of their organisations to increase over the next 24 months. Among them, 24% predict a dramatic increase in said breaches.

In a press statement, Aron Brown, Head of Regulatory & Compliance at Ocorian, said: “Compliance and risk teams and the expertise, insights and rigour they provide are front and centre to the bottom-line success of every fund manager. They hold a heavy weight of responsibility, and our research shows that failure to deliver can ultimately lead to lost investment.

“But compliance and risk teams must have the right investment and support in order to be able to do this – particularly when facing the challenges of an increasingly regulated operating environment. This could take many different forms, from investing in people and training, technology and systems, or third-party specialist providers who can provide a broad range of compliance services that are bespoke to individual needs.

“This conflict emphasises how important the three lines of defence are to a business and how the FCA’s emphasis on them being separate and cohesive is key – when they aren’t this level of conflict arises.”

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