Remarks Before the Asset Management Advisory Committee

Washington D.C.

Thank you. It is good to be with this Committee again.

I’d like to thank the members. For the past two years, you have studied and advised the Commission on a number of important issues, on top of your other responsibilities and roles.

This Committee was formed shortly before COVID-19 came to our shores. This Committee’s first recommendations had to do with the impact of the pandemic on our markets, including market structure, particularly on fixed income markets, and on the SEC’s operations, such as encouraging more electronic disclosure.

Recent recommendations tackled the important topic of diversity in the asset management industry, focusing on the underrepresentation of women and people of color in this sector.

Additionally, you offered insights into the growing field of Environmental, Social, and Governance (ESG) assets, around which we have work streams related to issuers and asset managers.

I thought I would take this opportunity to discuss the SEC’s work related to the asset management sector.

Today, the SEC oversees about 14,000 registered investment advisers with more than 49 million clients and approximately $110 trillion in regulatory assets under management.[1]

Within this field, there has been significant growth in the size and number of private funds, in particular private equity and venture capital funds. The number of private equity funds has increased by 58 percent over the last five years; the number of VC funds, 130 percent.[2] The amount invested in private funds has increased by more than 40 percent over the last five years.

The asset management field not only is growing; it is evolving. SEC staff are seeing new strategies, structures, and business practices. Technology is rapidly changing. This trend not only creates new opportunities, but also risks for markets and investors. The SEC must grow and evolve with the industry.

With these trends in mind, we have several projects at the SEC with respect to the asset management space.

First, fund disclosures. Many of the items on the regulatory agenda will have some focus on enhancing fund disclosures. As one example, we recently held an open Commission meeting to vote on enhancing the proxy voting disclosures that registered funds provide to shareholders. I was pleased to support those amendments.

The second area is digital engagement practices (DEPs). Today, like never before, asset managers — both incumbents and fintech startups — can tailor marketing and products to individual investors, using predictive data analytics and other DEPs.

In the case of robo-advisers or investment advisers, I wonder what they are doing within the predictive data analytics algorithms — if, statistically speaking, they are maximizing for our returns as investors, or, say, the revenues of the platforms. Further, to the extent that they’re maximizing revenues or doing a bit of both, how do we address the potential conflicts of interests that arise?

The next item has to do with the private funds. Private funds are growing, and today they’re worth about $22 trillion.[3] That’s why I’ve asked staff how we can bring greater transparency to this market in order to foster competition and efficiency, within our authority. Moreover, I’ve asked staff for recommendations for the Commission’s consideration around enhanced reporting and disclosure through Form PF or other reforms.

The fourth project has to do with fund naming. We’ve seen a growing number of funds market themselves as “green,” “sustainable,” “low-carbon,” and so on. I’ve directed staff to consider recommendations about whether funds should disclose the criteria and underlying data they use to make these claims.

The last work stream has to do with money market funds and open-end funds, and how we can continue to make those funds more resilient, learning from the COVID-related market events of March 2020.

AMAC’s exploration of many topic areas has been informative to our work. I encourage this group to stay connected to our work through the public notice and comment process. And again, I thank you for taking the time to provide advice to the SEC based on your experience and expertise in the field of asset management.

Thank you.

[1] Using data from Form ADV as of Dec. 2020.

[2] Comparing Form ADV data from Dec. 2015 to Form ADV data from Dec. 2020.

[3] Using data from Form ADV through Sept. 30.

Last Reviewed or Updated: Aug. 19, 2022