Jul. 31, 2020
To Whom it May Concern: I am writing today, on behalf of Brandywine Group Advisors, Inc. and Brandywine Managers, LLC (operating a single registered investment advisory business), to express our strong opposition to File Number S7-08-20, which suggests substantially raising the AUM threshold for 13F filing. Brandywine Group Advisors a registered investment advisor with regulatory assets over $10bn. I am the Chief Investment Officer of the firm, and I have been investing on behalf of families, endowments, and foundations for 20 years. We invest, as most endowments, foundations, and pensions do, largely by allocating our capital to investment managers. We take our fiduciary duties exceptionally seriously, and ensuring that these managers are responsible guardians of our capital is no small task. While best practices have been established, and much thought been given, to how performance is reported, investment managers have substantial flexibility over how and what they choose to report to us on their actual portfolio holdings. We have thus found 13F filings to be one of our most valuable tools to hold managers accountable on many levels. The holding-level detail provided by these filings helps us answer critical questions, a small sample of which I’ve provided below: Do we note any mismatches between a fund’s stated strategy and the types of investments in their portfolio? If we have a healthcare manager who is suddenly purchasing tech stocks, for example, this can lead to an important line of questioning. Are we comfortable with the level of concentration we note amongst the top holdings? Are we comfortable with the liquidity of the underlying holdings relative to the fund’s asset base or liquidity terms? What purchase and sale decisions does a manager make over time and why (relative to the selective information we might receive in a quarterly letter)? How does a manager’s portfolio shift as his or her AUM grows or shrinks—what are the changes, for example, in the underlying market cap of positions In what sectors has a manager made or lost money over the long-term, and how might this compare to what the manager tells us he/she does well? The SEC has an incredibly challenging job of serving as a watchdog across all investment managers, and the smaller managers, we imagine, might be the hardest to track based on their numerosity alone. On the other hand, endowments, foundations, and family offices often seek out small and medium sized managers (below $3.5bn in AUM) in whom to invest because we believe these managers are playing a much easier chess game: we are all in the business of maximizing risk-adjusted returns, and these smaller funds can take advantage of inefficiencies in the market that larger funds cannot access at scale. Allowing us, as institutional investors, all the tools we need to keep a close watch on these smaller managers is greatly enhances the transparency and safety of the system as a whole. We file a 13-F ourselves. We speak with our managers regularly, and even those firms with small teams and limited assets have managed very successfully to comply with this SEC requirement as part of their regular-way business. The information in the 13F is information they have at their fingertips, and in 20 years I can’t think of a single investment manager who has stated that they would defer the growth of their firm or asset base due to this particular filing requirement. We pay these managers healthy management fees to do just that, and typically the partnerships and funds managed by smaller investment firms pay the costs associated with regulatory filings, not the managers themselves. As an institutional investor who pays these costs regularly, it is a burden we welcome in exchange for the transparency this filing provides us. Thank you for your time and consideration. With greatest respect, Jennifer Heller President & Chief Investment Officer Brandywine Group Advisors