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Selecting a hedge fund auditor and tax preparer (Part I)

Earlier, I wrote a blog article about when new fund managers select a hedge fund auditor.  A month later now, I had another conversation with a potential client regarding selecting fund auditor and tax preparer.    With years of audit experience in public accounting, I will start this blog with a map of the public accounting world first.


They are on the top of the pyramid. They have the biggest clients and charge highest fees.  How are they different from each other? For example: Ernst Young has more hedge fund clients than other Big Four.  Why?  All their hedge fund audit/tax staff work on hedge fund clients only from the day they start with the firm.  The other Big Four staff work on all different industry for the first two years.  People is what set each firm apart.  PricewaterhouseCoopers has a big market share in mutual fund industry, whilst Deloitte has a solid practice in private equity funds.  KPMG is very quiet in this industry sector. [Edit in May 2013] Recently, KPMG has been a lot more active in the alternative investment industry sector, and it will be interesting to see how it may change the competition landscape.

Firms such as Rothstein Kass will be second in line.  Comparing to its smaller competitors, it has more recognition nationwide with offices across the states.  If the fund markets mainly towards investors in other states, a house-hold name will give the manager an easier time.  On the other hand, the fund also pays for the reputation.

Firms such as Harb, Levy & Weiland (now Eisner Amper), my previous employer will be third in line.  It had more than 300 hedge fund clients (very good size).  Very reputable in the west coast.  It has a competitive edge comparing to Rothstein Kass in terms of pricing and individual attention.

There are other firms competing for the space, such as DZH Phillips.  Most of them are eager to establish recognition, and such mentality drives down the fees.  In some cases, the fund managers can get both audit and tax services at the price of one, comparing to what’s offered elsewhere.

(Continue to Part II)