Alternative investment funds which need to register with the Securities and Exchange Commission for the first ttime will find it a costly process, according to research firm Aite Group.

Hedge funds and private equity funds will find their costs increasing on several fronts: legal, technology and staffing.

How much?

An Aite report released Monday  says that depending on the size, complexity and products of an alternative fund, a portfolio management and accounting system could cost $100,000 to $400,000 at a minimum and over $1 million at most. Portfolio management systems are needed to retain the books and records of the hedge funds.

The estimates are contained in a report titled "Alternative Funds, Meet Dodd-Frank and the EU Directive."

Chief compliance officers won't come cheap, for instance. Such executives can earn from $300,000 to $500,000 a year, if they have previously worked for a regulator or have a legal background.

And this is just the tip of the iceberg. There are registration processing fees, legal advisory fees, third-party audit fees, staff time spent responding to ad-hoc SEC audits or inquiries, fees to consultants or advisers to prepare for registration or assist with operaitonal change to procedures to comply with changes.

Alternative investment funds deciding to outsource their middle and back office operations and reporting will still need to factor in the cost of outsourcing, according to Aite Group's analyst Denise Valentine.

Those costs can depend upon volumes, number and types of funds, types of activities contracted out, as well as the organizational time needed to meet oversight requirements.

"The operational quality and reporting capabilities of the hedge fund administrator or securities servicing firm is critical -- the alternative fund will need to comply with all regulatory requirements, including granular report disclosures," writes Valentine.

Although Valentine did not break out how much it would cost alternative investment funds to comply with European regulations such as the Directive on Alternative Investment Fund Managers, many of the provisions are similar to the U.S' Dodd-Frank financial reform measure adopted in July 2010. Hence, its likely fund managers will have similar technology and staffing needs.

Under Dodd-Frank, hedge fund advisors must register with the SEC if they manager more than $100 million in assets of both hedge funds and separately managed accounts.

The figure rises to $150 million if the adviser manages only hedge fund assts. Advisors to private equity funds with less than $150 million in assets under management are exempt from SEC registration but must complete some parts of Form ADV, the form used to register by investment advisers. As a rule of thumb, advisers managing anywhere from $25 million to $100 million in hedge funds and separately managed accounts may also be required to register with their home state.

The European Directive on Alternative Investment Fund Managers, passed in November 2010, requires that advisors to funds with more than 100 million euros in assets which use leverage and 500 million euros in assets using no leverage and a five-year lock-up period must register.

Advisors could also expect that depositaries -- typically custodian banks -- may pass along additional fees resulting from their need to comply with requirements imposing a high standard of liability in the event the fund they service loses any assets. European Union member countries have until mid- 2013 to adopt the legislation into national law.

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