Launching an investment fund and providing ongoing management is an arduous and expensive task. Current laws and legal requirements are designed to protect the capital of the investors, but they have become major obstacles.
The issue with these numerous regulations and laws is they build barriers for investors and management practices. Organizations as well as individual investors will incur expenses as they work to achieve and maintain compliance with the laws and regulations. Many times, these are direct costs, including fees for regulation and installation expenses. Indirect costs also exist, such as ongoing reporting for regulatory requirements and back-office support. Integrations are often necessary to meet requirements. Fund management is only viable financially when a specified volume of assets are placed under management. This volume is often quite expansive, which reduces the number of managers who are able to enter the market. Those already operating in the realm become exclusive.