A consortium of groups representing the private funds industry has filed a lawsuit against the Securities and Exchange Commission (SEC) in an effort to block recently adopted rules. These rules would require private equity and hedge funds to disclose their quarterly performance, fees, and expenses. Additionally, the rules would restrict the use of side letters, which are agreements that give preferential treatment to specific investors unless they are made available to all investors.
Several other industry groups joined the MFA in the lawsuit against the SEC, including the National Association of Private Fund Managers, National Venture Capital Association, American Investment Council, Alternative Investment Management Association, and the Loan Syndications & Trading Association. The SEC declined to comment on the matter.
SEC Chair Gary Gensler has defended the new regulations in various speeches and statements. He has emphasized the need to protect investors, particularly pension funds and endowments that have increasingly turned to alternative investments in search of higher returns. Gensler emphasized that the private funds industry now manages a substantial $25 trillion in assets, surpassing the size of the U.S. banking sector.
Gensler acknowledged the significant role played by the private fund industry across different sectors of the capital markets. He also highlighted its importance to investors such as retirement funds and endowments. He underscored that these investors ultimately represent a diverse group that includes teachers, firefighters, municipal workers, students, and professors.
