Prepared Remarks Before the Small Business Capital Formation Advisory Committee

Washington D.C.

Good morning. It is good to join the advisory committee for your first meeting of the year. As is customary, I’d like to note that my views are my own and I am not speaking on behalf of the Commission or SEC staff.

I want to start by thanking the members—13 of you—who are concluding your terms with the committee. Further, I appreciate that at the end of today’s meeting a number of you will be sharing your parting perspectives.

Before that, though, the Commission will benefit from hearing the discussions on all of the matters on today’s agenda: alternatives to traditional bank and venture capital funding for smaller companies, our proposal relating to private fund advisers, and the role of equity research for smaller companies. Let me share a few thoughts on the private funds proposal.

The Commission made a proposal a year ago in February regarding private fund advisers.[1] These funds, including hedge funds, private equity funds, venture capital funds, and liquidity funds, currently hold approximately $21 trillion in gross assets.[2] Given their relative growth, these funds soon may surpass the U.S. commercial banking sector in size ($23 trillion).[3]

Why do private funds and their advisers matter? Because of the people that stand on either side of the funds. The people whose assets are invested in private funds often are teachers, firefighters, municipal workers, students, and professors. On the other side, the people raising money from private funds might be startup entrepreneurs, small business owners, or the managers of late-stage companies.

In this space, there may be somewhere in the range of $250 billion in fees and expenses each year.[4] That’s money that portfolio companies, like small businesses, do not get to use. Though fees among other funds—such as mutual funds and exchange-traded funds (ETFs)—have had significant reductions in recent years, private fund fees have not come down in a comparable way.

Given that these funds touch so much of our economy, efficiency and competition among these intermediaries is important. That’s why I supported our proposal to require registered private fund advisers to provide detailed reporting to investors of fees, expenses, performance, and preferential treatment, such as side letters.

More competition and transparency could bring greater efficiencies to this important part of our markets. Such efficiency would help the people and entities on both sides of a fund—including small businesses. I look forward to hearing more about the committee’s views on our proposal.

Thank you.

[1] See Gary Gensler, “Statement on Private Fund Advisers Proposal” (Feb. 9, 2022), available at See also Gary Gensler, “‘Competition and the Two SECs’: Remarks Before the SIFMA Annual Meeting” (Oct. 24, 2022), available at

[2] This represents registered investment adviser (RIA) private fund gross asset value reported on Form ADV through December 2022.

[3] See Board of Governors of the Federal Reserve System, “Assets and Liabilities of Commercial Banks in the United States,” available at Total assets of approximately $23.1 trillion as of Jan. 27, 2023 (Table 2, Line 33)

[4] See Gary Gensler, “Prepared Remarks at the Institutional Limited Partners Association Summit” (Nov. 10, 2021), available at

Last Reviewed or Updated: Feb. 7, 2023