Whether driven by the demands of potential or existing investors, regulators or a new strategic direction, hedge fund and private equity firms are moving beyond their historically entrepreneurial outlooks to enhance their operational risk management, financial controls (SOX and SAS 70) and internal audit.
Above-average returns in recent years attracted increased attention from institutional investors looking to diversify. Institutional asset flows exceeded $734 billion into hedge funds and $494 billion into private equity funds in 2007. With the onset of the credit crisis and continuing challenging market conditions, alternative asset managers must work harder to retain these clients. The pressures for transparency, further disclosure and greater scrutiny of risk management procedures are mounting.