Roughly 95 percent of the hedge funds that we contacted said their costs had risen in 2005, and nearly half of the respondents expect their compliance costs to rise yet again.

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The expectation of rising costs indicates that hedge fund managers as a whole recognize that, for better or worse, hedge funds are entering into a new era of regulation.

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When founders of a hedge fund are told they have to do such and such by compliance officers, that could be like having an employee tell the boss what to do, and that might not go over very well.

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