July 16, 2020
The proposed rule will increase search costs for limited partners who are looking to hire smaller active managers and will make it more difficult for limited partners to monitor whether active managers they have hired (or are evaluating) are actually adhering to the strategy that they purport to follow.
Many limited partners, such as myself, use the filings as a way to discover active managers who invest their capital in ways that align with our investment objectives. With an increased reporting threshold, it will be more difficult and time consuming for us to find smaller active managers because we won't have a quick way to filter out those that don't suit our preferences and/or investment philosophy.
This increase in search costs will likely be borne directly and indirectly by limited partners and will disadvantage smaller firms relative to their larger peers (who can afford to spend more resources on marketing/finding potential clients). In my view, time is the most precious resource that small investment firms have, and time spent on marketing detracts from time spent on investment research and, ultimately, from returns.