Running with it: It may hurt now, but more regulation may boost manager returns in the long run
The equation between regulation and cost may seem fairly simple: the more forms you need to fill out, the more records you need to keep, the more money you will have to pay out to stay compliant with the law.
Many institutional real estate investment firms openly admit that the additional regulation they have had to adhere to in recent years has hurt profitability. But this has not necessarily put them at a disadvantage when com-pared to other alternative investment managers.
“Regulatory compliance has added a layer of costs — for example the need for a depositary under AIFMD — which will erode returns,” says Eoin Bastible, the London-based managing director, head of business development EMEA for UBS Asset Management, real estate and private markets. “But it is not clear this would make the real estate asset class any less desirable relative to other asset classes, given that other classes face similar regulation.”
The reassurance of red tape