When will hedge funds start hiring compliance staff?

Now that it's been finalised, the EU's Alternative Investment Fund Manager's Directive (AIFM) is not the autocratic monster many hedge funds feared it would be.

Still, it's no walk in the park, and will place a greater regulatory burden on hedge funds, meaning compliance staff could become the new hot property in the alternatives sector.

A helpful summary of the directive's implications, which include new rules in remuneration, enhanced disclosure and a requirement to have depositaries has been compiled by Financial News. But is it likely to create a new-found desire to hire compliance staff?

"The new directive is going to significantly increase the regulatory burden on hedge funds, so in theory most should look to increase both compliance and internal legal headcount," says Jérôme de Lavenère Lussan, CEO of hedge fund compliance onsultancy Laven Partners. "But, while this may happen within the bigger players, smaller hedge funds are more likely to look to external consultancies and even then there's likely to be inconsistency in the level of compliance."

Recruiters that specialise in recruiting compliance specialists have yet to an influx of requests from hedge funds, largely because teams in this area are traditionally small. But because of this, they're likely to need to increase headcount now that regulators are tightening the screws.

Rowan Crooks, head of Kinsey Allen's compliance division says: "From the hedge funds we speak to, the suggestion is that the greater onus on regulation will lead to an increase in headcount in the compliance teams, which can be as small as two or three people. Predominantly, funds would look to recruit from the investment banks."

If hedge funds look to tap investment banks' compliance teams they may encounter some problems. Banks currently pay more than hedge funds for compliance staff and salaries are on the rise.

"There's greater bonus potential for compliance staff within investment banks," adds Edward Manson, consultant on the compliance team at recruiters PSD Group. "We've also reached the point where candidates are scarce and banks are prepared to counter-offer. They would rather bump up salaries and than lose good people in the current climate."