Here are two final factors that contributed to the decline of legal and compliance as the top operational priority in the private fund space.

5. Competing Issues. Other operational issues arose to compete with legal and compliance. There is of course cybersecurity (though it has a legal and compliance component). And worthy social causes like ESG. There are also financial considerations that have grown more acute in a low-return, fee-compression era. Firms have also grappled with implementing new technology, and whether, when and where to outsource.

6. Investor expectations. Finally, a decade ago, investors seemed far less tolerant of any reputational risk coming from the operational side of the managers they invested with. But for some of the same reasons described above, reputational risk from the legal and compliance side has dropped down the investor priority list, provided the returns are there. As a result, having a best in class legal and compliance program (not to mention the entire operational side of the business) is no longer viewed as a substantial differentiator.

Up Next: The Way Forward for Legal and Compliance