Managing the tax liabilities of hedge funds will soon be a priority for investors, according to PricewaterhouseCoopers.
The company has published its sixth annual global hedge fund whitepaper, which puts tax issues and transparency at the top of the agenda.
The document, called Operational Risk: an Alternative Challenge, reviews and summarises the regulation, taxation and distribution of hedge funds around the world.
PwC's UK financial services tax leader, Robert Mellor, noted: 'Recent regulation, US congressional enquiries and pressure to adopt governance standards have all increasingly challenged investors to consider and understand the tax issues associated with their underlying investment.
'Funds in many territories are voluntarily adapting to the standards of FIN48, one of the most significant developments on the tax scene.'
Mr Mellor added: 'Managing tax liabilities will move centre stage as increasingly fiscally challenged tax regimes focus more and more on cross-border capital flows.
'Withholdings taxes, beneficial ownership, substance and permanent establishment risk are all weapons in the armoury of tax-seeking fiscal authorities from the developed world to emerging economies.
'From an investor's perspective, tax leakage at the portfolio level will become ever more relevant as investment performance flattens. If you save 50 [base points] by better tax management, then this can flow straight to the profit line.'
