Compliance issues have caused 81% of alternative fund managers to lose investment mandates or clients in the past three years, according to research from Ocorian and Newgate Compliance, a provider of regulation and compliance services for funds, corporates, capital markets and private clients.

The study found that the global group of managers, who collectively oversee over $123.3 billion in assets, have a pessimistic outlook regarding improvement. Specifically, 92% of them anticipate a rise in compliance breaches over the next two years.

“Compliance and risk teams and the expertise, insights and rigor they provide are front and center to the bottom-line success of every fund manager,” Aron Brown, head of regulatory and compliance at Ocorian, said. “They hold a heavy weight of responsibility, and our research shows that failure to deliver can ultimately lead to lost investment.”

Over the last two years, the study noted that there has been a noticeable escalation in internal conflict between the fund management team and the compliance and risk team. Over 90% of respondents anticipate further increases in conflicts over the next three years.

“This conflict emphasizes how important the three lines of defense are to a business and how the FCA’s emphasis on them being separate and cohesive is key – when they aren’t this level of conflict arises,” Brown said.

Ocorian and Newgate outline the three lines of defense as creating policies for compliant businesses and providing training; providing oversight from a team or compliance officer; and independently auditing the company to identify gaps and ensure roles are appropriately separated and defined.