What Drives Dodd-Frank Act Compliance Cost for Private Funds?
The Journal of Alternative Investments (2016)
Posted: 11 Jul 2015 Last revised: 22 May 2019
Date Written: July 10, 2015
This study assesses the effects of Dodd-Frank Act compliance costs on the private fund industry. Using hand-selected compliance cost estimates from private fund advisers (N=94) the study shows with two independent datasets that the number of funds managed by private fund advisers is associated with Dodd-Frank Act compliance cost. The size of registered private fund advisers as measured by assets under management is not associated with the per-unit cost of Title IV compliance and other independent variables as proxies for cost. These findings are consistent with the hypothesis that the cost of financial regulation under the Dodd-Frank Act brings increasing returns to scale. Private fund advisers’ use of single versus multiple investment strategies does not have an effect on Title IV compliance costs.
Keywords: Private Funds, Dodd-Frank Act, Compliance Cost, Barriers to Entry, Returns to Scale
JEL Classification: G23, G24, G28, K22
Suggested Citation: Suggested Citation