This year’s winner of Hedgeweek’s Best US Audit Firm award for the second year running, CohnReznick, provider of integrated audit, tax and advisory services, keeps a keen eye on recent market trends to meet the needs of its alternative fund management clients.
Gary Berger, Partner and Northeast Practice Leader of CohnReznick’s Financial Services industry practice, says: “Successful alternative investment fund managers understand the market conditions and economic factors impacting their ability to raise capital, invest wisely and operate efficiently.”
CohnReznick is seeing more strategies around cryptocurrency or digital assets, but remains cautious on working with these due to regulatory concerns, audit issues and other uncertainties.
Berger notes that almost half of new fund launches are long-short equity managers, although with different strategies such as healthcare and emerging markets. “Private credit, multi-strategy, and real estate funds also predominate,” he adds.
Capital raising remains a major challenge, with a lot of headwinds, especially for emerging managers. Raising capital demands that managers cast a wide net and talk to a lot of people; Berger believes that if they have a good story, their chances of success are that much greater. Seeders look at hundreds of emerging managers every year and only seed a handful; therefore, an emerging manager must have their own capital or access to ‘friends and family’ money.
Berger says: “This itself is a vicious cycle because they’re making concessions along the way on those investors’ fees. And portfolio managers are putting a lot of their own liquid capital into the fund because they want to have skin in the game.”
He also points to a well-thought ESG strategy as a social and financial value driver for both emerging and experienced managers, with the expectation of continued emphasis on ESG going forward.
Looking to do the future
Over the next 12 months, CohnReznick notes that current uncertainty from tax, political, and inflationary perspectives, coupled with questions around tax proposals – particularly around capital gains and carried interest – may cause fund managers to adjust their trading strategies.
Overall, however, Berger remains optimistic on the alternatives industry: “We think it will continue to grow. Hedge funds have performed well so far this year, and we think that performance will propel them to increase the overall AuM of the industry. We think more and more new funds will be out there.”
Among the key services requested from CohnReznick’s clients are:
- Audit: “CohnReznick’s audit and assurance professionals create lasting relationships based on truth, and deliver comprehensive audit, attest, and accounting services held to the highest standards of excellence and independence,” Berger says.
- Tax: Through proactive, advice-driven strategies, CohnReznick helps clients to mitigate risk and realise appropriate tax advantages.
- Advisory: CohnReznick Advisory leverages a proprietary platform to oversee clients’ transactions or transform the way they do business.
- Compliance: In addition to core services, managers are increasingly asking for advisory services such as cybersecurity, technology risk and privacy, managed services and outsourcing.
Additionally, emerging managers are asking for help getting started, and CohnReznick is developing ESG strategy assessments and solutions for alternative investment funds.
Gary Berger, Senior Audit Partner, Cohnreznick
Based in the Firm’s New York office, Gary Berger is extensively involved in the Firm’s Financial Services practice and has over 25 years of experience serving domestic and offshore hedge funds, private equity funds and fund of funds. He provides advice on fund start-up issues, including organisational structure, economic and tax issues and general business consultation. Berger’s previous experience includes serving as a Senior Vice President at a large global administrator.
