Dodd-Frank driving investor acceptance of hedge fund model.

• Position: REGULATION

A new study of the effects of the Dodd-Frank Wall Street Reform and Consumer Protection Act on hedge fund managers suggests that rules providing for increased transparency and, at the same time, investor demand for information have proven a positive development for the industry The report, by the Frank G. Zarb School of Business at Hofstra University in conjunction with accounting and advisory firm EisnerAmper LLP, found that Dodd-Frank regulations are helping fund managers raise capital and reassure investors.

Due diligence process, risk management procedures and reporting requirements all have increased investor acceptance of hedge funds, allowing them to become increasingly mainstream investment vehicles for institutional and individual investors, the study found. In particular, large firms seemed to welcome the additional scrutiny, with significant majorities favoring U.S. Securities and Exchange Commission registration and the European Passport. A majority supported supervision from the Treasury and the Federal Reserve Bank.

"Managers view registration with the SEC as a cost of doing business," says Nicholas Tsafos, a partner with EisnerAmper. "It makes investors more comfortable with hedge fund investing."

The study included interviews with more than 40 senior managers from hedge...