For Jonathan Grabel, chief investment officer for the $14.5 billion New Mexico Public Employees Retirement Association, Santa Fe, tighter banking rules created investment opportunities. “If banks are not lending as much as they had historically, there is a need for other parties to provide direct loans to smaller companies,” Mr. Grabel said.
“I think the regulatory environment that we are in now has created tremendous investment opportunities for long-term pools of capital like PERA in the direct lending space,” including a recent commitment up to $200 million to a direct lending fund managed by credit manager Tennenbaum Capital Partners LLC.
Restrictions on banks doing proprietary trading have been good for other asset managers.
“In general, the Volcker rule taking prop trading out has created better opportunities for the strategies we invest in and the managers we use to implement those strategies,” said Ray Nolte, chief investment officer at SkyBridge Capital LLC, New York, which manages $12.4 billion in hedge funds of funds, mostly for institutional investors.
Yet while the act took away banks' bargaining advantages, it also took away their role as a shock absorber to market moves in times of turmoil, Mr. Nolte said. “The unintended consequence is to actually heighten the volatility. I think it's created more noise along the way,” he said.
For large investors like members of the Council of Institutional Investors in Washington, which represents $3 trillion in combined assets, Dodd-Frank improved corporate governance, said Deputy Director Amy Borrus. Requiring companies to hold say-on-pay votes at least every three years “really was a catalyst for robust engagement between companies and shareholders. It's caused (compensation) committees to be more thoughtful about compensation and performance,” she said.
“If you are an activist equity manager trying to get companies to restructure, it definitely gives you more clout with fewer dollars,” said Mr. Nolte.
“Investors, led by the New York City pension funds, embraced private ordering in earnest, and now close to 300 companies have proxy-access bylaws,” said Ms. Borrus.
For Rick Fleming, investor advocate at the Securities and Exchange Commission, Dodd-Frank was all about investors, who, according to the Financial Crisis Inquiry Commission, lost $11 trillion in household wealth, including retirement accounts and savings, between 2008 and January 2011.
Mr. Fleming, whose post was created by Dodd-Frank along with the investor advisory committee, said in a recent speech that the new office “reflects a recognition that investors were underrepresented at the SEC in the years leading up to the financial crisis.” He is a fan of the swaps rules, more asset-backed securities disclosure and credit risk retention rules requiring issuers to have skin in the game. He also would like to see more curbs on credit rating agencies.
Dodd-Frank swaps rules are valuable, said Jim Allen, head of capital markets policy for the CFA Institute in Charlottesville, Va. With business conduct standards bringing more transparency, “you have a better sense that somebody's watching to make sure that things aren't getting out of whack. It has given investors a better sense of pricing, and it's been reasonably better for issuers as well,” said Mr. Allen, who also thinks less reliance on credit agencies forces companies and investors to do their own due diligence.