The reforms introduced by Basel III have fundamentally changed the way in which asset managers are connected to the financial system, according to a joint survey and report by the Alternative Investment Management Association (AIMA), the global representative body for alternative asset managers, and S3 Partners, a financial data, analytics and services firm.
“There is no doubt that the Basel III banking standards are having a significant impact on hedge funds and other alternative asset managers,” says Jack Inglis, CEO of AIMA. “Financing costs are rising and the fund manager/prime broker relationship is changing fundamentally. It is our hope that this timely and important report will provide clarity and direction to those who have felt the impact of the recent regulations, and to give context to issues that are being felt across the industry.”
The survey of fund managers worldwide found that financing costs have risen for 50 percent of firms, with an even split between those who quantify the level of cost increase as being greater than 10 percent and below 10 percent.
Moreover, 75 percent say they expect further cost increases over the next two years. The impact is consistent regardless of a fund manager’s size, investment strategy or location, says the AIMA.