Bryan Corbett: “The alternative asset management industry plays a critical role in the portfolios of institutional investors, yet the Commission has paid little regard to the interoperability of this rule with the many other recently proposed rules governing the industry.”
WASHINGTON, DC – Managed Funds Association (MFA), the trade association for the global hedge fund and alternative asset management industry, today submitted a second comment letter to the U.S. Securities and Exchange Commission (SEC) that re-emphasizes fundamental flaws with the proposed Private Fund Adviser rules. MFA’s letter provides further evidence of how the proposed rule will harm investors and the inadequacy of the SEC’s economic analysis.
“While we appreciate the reopening of the comment period, MFA’s further analysis of the Private Fund Adviser rules underscore the need for the SEC to withdraw its proposal,” said MFA President and CEO Bryan Corbett. “Contrary to the stated intentions of the Commission, the proposed rules would cause irreparable harm to institutional investors—including pensions, foundations, and endowments—and their ability to deliver for their beneficiaries.”
MFA’s comment letter highlights the unintended consequences of the rule for institutional investors—including pensions, foundations, and endowments. The letter also draws attention to the many recently proposed rules governing the private fund industry and argues that the SEC has not fully considered the aggregate impact of these rules.
“The proposed rules would upset the longstanding relationship between alternative asset managers and their sophisticated investors, which would ultimately raise costs, reduce transparency, and decrease investment choice for institutional investors,” added Bryan Corbett. “The alternative asset management industry plays a critical role in the portfolios of institutional investors, yet the Commission has paid little regard to the interoperability of this rule with the many other recently proposed rules governing the industry.”
Further detail about the comment letters is included below.
MFA emphasizes that the proposed rules will harm investors, despite the Commission’s expressed intention to protect them. From the letter:
“We discuss certain of the unintended consequences of the Proposed Rules for investors—including increased costs, reduced investing opportunities, reduced alignment of interest, and more limited negotiating ability—especially in cases where adequate disclosure is entirely sufficient to address the issues identified by the Commission.”
MFA also argues that the proposed rules will have a disproportionately negative impact on small and newly-formed advisers. From the letter:
“Notwithstanding the impact on existing advisers and the ability of many small and mid-size advisers to manage costs, the aggregate cost of the Commission’s recently proposed rulemakings will be almost insurmountable for smaller and newly-formed advisers, including women and minority-owned advisers (who are already under-represented in the industry). This will create barriers to entry for new advisers, which will further contribute to industry consolidation, with the result being decreased investment competition and investor choice.”
MFA draws attention to the many recently proposed rules governing the private fund industry and argues that the SEC has not fully considered the aggregate impact of these rules. From the letter:
“Since the end of last year, the Commission has proposed an unprecedented number of significant rulemakings, which would reshape the make-up of the securities markets and their participants, including a number of rules imposing new, substantive requirements on private fund advisers. As such, we think it is imperative for the Commission to conduct a more comprehensive cost-benefit analysis that includes an aggregate review of the impact of the costs from other rulemakings on investment advisers.”
MFA’s full supplemental comment letter to the proposed rules can be found here.
About the Global Hedge Fund and Alternative Asset Management Industry
The global hedge fund and alternative asset management industry, including hedge funds, credit, managed futures, and hybrid funds that invest in private companies, has assets under management of $4.3 trillion (Q2 2021). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.
About the Managed Funds Association
Managed Funds Association (MFA) represents the global hedge fund and alternative asset management industry and its investors by advocating for regulatory, tax, and other public policies that foster efficient, transparent, and fair capital markets. MFA’s more than 150 member firms collectively manage nearly $2.6 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time. MFA has a global presence and is active in Washington, London, Brussels, and Asia. www.managedfunds.org