"Is Elliot Spitzer Here?"

Brett Goodin, president of the Asia-Pacific and Japan region for Fidelity Investment Management, predicts a continued growth in outsourcing demanded by hedge funds, which traditionally piggy-back on the infrastructure and lending capabilities of prime brokers for their trading. Further outsourcing will be demanded by traditional asset managers, he adds.

Hedge funds, Goodin says, will likely come under increased regulatory scrutiny, as will traditional asset managers that begin to offer hedge-fund-like products.

The increase of regulatory oversight will drive managers to outsourcing, he says, instead of continually investing in new compliance technology. But rather than endorsing the new wave of regulatory oversight in the form of scandal-induced legislation, Goodin speaks out against it.

"Is Elliot Spitzer here?" he asks, referring to New York's attorney general. "Everywhere I go he pops his head up and he is making our lives miserable ... This approach of imposing rules is, in many cases, a woolly headed and knee-jerk reaction."

Goodin says that, rather than a lack of rules, four factors have contributed to the scandals of the past few years: incompetence-firms straying outside of their core competency; excessive risk appetite; lack of integrity; and a lack of autonomy combined with inappropriate pressure for short-term results.

"Unless the industry acts with those four things in mind, new rules won't account for a hill of beans," Goodin says. "I think that we are in a spiral of increased regulations and political-points scoring. This is bad."