KPMG US has acquired audit, tax and advisory firm Rothstein Kass and as a result becomes the largest audit firm in the hedge fund market, the Big Four network has announced.

Headquartered in New York, Rhostein Kass has 1,000 principals and professionals in 10 offices across the US. It provides audit, tax, and advisory services to hedge fund, private equity and venture capital clients. The New York firm’s principals and employees will join KPMG alternative investments practice which counts 6,000 partners and professionals worldwide.

With this acquisition, KPMG takes over EY as the largest auditor of hedge funds based on client numbers, according to a report by the Wall Street Journal. Prior to the move KPMG was ranked fifth.

KPMG’s acquisition confirms the recent growing interest of accounting and auditing firm in the alternative investments market. The hedge fund industry, in particular, has seen exponential growth in recent years. And hedge funds are expected to reach a record breaking $3tr by year end 2014, up from $2.6tr as of 2013 year end, according to a Deutsche Bank survey.

On the other hand, due to increased and tighter regulations resulting from recent hedge fund scandals, most notably the Bernard Madoff case, alternative investments businesses have a growing appetite for auditing, accounting and advisory services.

"Combining the strength of KPMG and its global reach with Rothstein Kass’ leading market position will create the preeminent professional services provider in the hedge fund market," KPMG global chairman John Veihmeyer said.
"This powerful combination will provide the services and capabilities our clients need as they face new regulations, increasing market complexity and global convergence that are affecting hedge funds and the broader alternative investments industry around the world."

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In a statement KPMG US said that the transaction is expected to close in the coming weeks, and terms of the agreement will not be disclosed.

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Rothstein Kass