Alternative asset managers, industry advisers and consultants say the SEC's lifting of the 80-year ban on marketing and solicitation could improve some information flow for institutional investors and potential investors. But they see some firms opting to remain under the old regime.
And for funds with certain commodity strategies, the new SEC rules might not fit with existing U.S. Commodity Futures Trading Commission rules, prompting funds with those strategies to remain under the old regulations as well.
The Securities and Exchange Commission proposed new rules earlier this month that are open for comment for 60 days from the date they are published in the Federal Register, expected to be sometime this fall, on marketing for alternatives investment managers. The new rules were mandated by the Jumpstart Our Business Startups Act of 2012.
In the private alternatives investment world, knowledge is power. Information can give investors a window into their managers' investment strategies, returns and methods for calculating those returns. Insiders say removing the marketing ban could help the flow of information reach the levels now existing with traditional money managers.
“At the end of the day, it's all about information,” said Heather M. Stone, partner and chair of the fund formation practice group in the Boston office of law firm Edwards Wildman Palmer LLP.
“My hypothesis is that for sophisticated limited partners, they will have this new rule as another arrow in their quiver,” said Ms. Stone, who represents both investors and managers. “You (alternative investment managers) have no excuse of why you don't need to give me this information. You will have to flat out say you don't want to give it to me.”
Hopefully, the removal of the marketing ban will halt the rumor mill constantly churning on which alternatives managers are or are not fundraising, she said.
But it most likely willnot result in a flood of information flowing to investors, potential investors and the public.
The kind of information general partners don't like to share with limited partners is information concerning portfolio companies, rather than fundraising information.
“I don't see general partners ever becoming more comfortable sharing that kind of information,” Ms. Stone said. “That will also continue to be a problem.”