What Drives Dodd-frank Act Compliance Cost for Private Funds?
Abstract: To assess the effects of Dodd-Frank Act compliance costs on the private fund industry and evaluate drivers of compliance cost, I collect and code compliance cost estimates from private fund advisers (N=94) after the registration effective date for private fund advisers under Title IV of the Dodd-Frank Act. I show with two independent datasets that the number of funds managed by private fund advisers is associated with Dodd-Frank Act compliance cost. However, the size of registered private fund advisers as measured by assets under management (AUM) 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 predominantly affects smaller private fund advisers. Private fund advisers’ use of single versus multiple investment strategies does not have an effect on Title IV compliance costs.
