All money managers, including hedge funds and private equity firms, should be required to register with the SEC as investment advisers and be subject to agency oversight, CalPERS CIO Joseph A. Dear said in prepared remarks to be given to a Senate subcommittee this afternoon.
“The fundamental risk posed by private pools of capital is that they can choose to operate outside the regulatory structure of the United States,” Mr. Dear said in the text of testimony to be delivered at a hearing of the Senate Subcommittee on Securities, Insurance and Investment.
“When these entities operate in the shadows of the financial system, regulatory authorities lack basic information about exposures, leverage ratios, counterparty risks and other information necessary to assure that overall risk levels in the financial system remain reasonable,” said the CIO of the $182.4 billion California Public Employees' Retirement System, Sacramento.
Also Andrew Donohue, director of the SEC's division of investment management, said in prepared remarks, “The registration and oversight of private fund advisers would provide transparency and enhance commission oversight of the capital markets. It would give regulators and Congress, for the first time, reliable and complete data about the impact of private funds on our securities markets.”
Mr. Dear was a member of the Investors' Working Group, which today also called for registration requirements for all managers.