Loan Note: AIMA takes aim at the SEC; investors target energy transition

AIMA broadens fight with SEC

The Alternative Investment Management Association is prepared to take the fight with the Securities and Exchange Commission beyond its group legal action over the Private Fund Advisers Rules, according to its chief executive officer, Jack Inglis.

In a note in AIMA Dispatches, Inglis first says he is pleased that the group action – involving various industry associations including the American Investment Council and Managed Funds Association as well as AIMA and others – has been expedited by the courts so that a decision can be expected by the middle of next year.

The action, which was submitted at the beginning of September, called for the new rules to be set aside. The associations see the rules, which purport to increase transparency, as unjustified and costly. It said in a statement at the time that the new rules will “curb the entrepreneurialism, flexibility and investment returns that have until now made private funds an increasingly attractive option for the world’s most sophisticated investors”. See our initial reflection on the rules here.

But it’s clear AIMA is broadening its campaign against the SEC to other fronts. It says it is also defending the definition of a “securities dealer” to prevent many funds having to register as dealers. This, Inglis says, “could be existentially disruptive to the asset management model” as the SEC allegedly seeks to “drastically broaden the definition” that came into being with the Securities Exchange Act of 1934. AIMA says such a change should be legislative rather than by way of what it describes as “unilateral agency reinterpretation”.

AIMA is also challenging changes to the Custody Rule, which it says would expand the scope of assets subjected to custodial oversight but change established concepts of safekeeping to an extent that is “both unworkable in practice and harmful to investors”. AIMA is one of 26 co-signatories to a letter from trade associations urging the SEC to drop the rule.

The note makes the argument that the SEC is “seeking to rely on their novel read of existing legislated acts to try and push through an agenda of profound and disruptive change in nearly all areas of the US capital markets”.

Investors target energy

Energy transition is the big winner when it comes to investor appetite, according to a new survey from Schroders.

More than two-thirds of respondents (67 percent) said they thought that the energy transition would be likely or highly likely to create significant investment opportunities and around half said infrastructure/renewables fund managers would be best placed to capture decarbonisation opportunities in the medium term.

Partially inspired by these opportunities perhaps, 41 percent of investors said they expected to increase their infrastructure allocations over the next year. This was somewhat higher than the 35 percent that said they expected to increase their allocations to private assets in general.

Inflation and geopolitical uncertainty were cited as investors’ biggest concerns. Over the next year, more than half of investors said they expected these two issues to have the biggest impact on portfolio performance.

While there had been hopes that inflation would be subsiding by now, the survey noted that decarbonisation, changing demographics and deglobalisation all have the potential to keep inflation high. On the deglobalisation trend, more than half of respondents said they would look to invest in companies with more localised supply chains.

The Schroders Institutional Investor Study 2023 quizzed 770 investors across 36 regions, accounting for almost $35 trillion in assets.

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