Question A:
SEC Announcement: https://www.sec.gov/news/press-release/2023-155
The benefits of the new SEC rules on private funds - which require private funds to provide transparency to their investors regarding the fees and expenses and other terms of their relationship with private fund advisers and the performance of such private funds - substantially exceed their costs.
Responses
Responses weighted by each expert's confidence
Question B:
The new SEC rules will have a substantially negative impact on the industry by stifling capital formation and reducing competition.
Responses
Responses weighted by each expert's confidence
Question C:
It is appropriate policy for the SEC to impose such rules on private funds even though the investors (limited partners) are sophisticated entities.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
 John Campbell |
Harvard | Bio/Vote History | ||
|
As private funds have grown in importance and have attracted more capital, basic transparency standards are appropriate.
|
||||
 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
|
These are bargains between sophisticated people. "Market failure" happens when a market disappears. This one is booming. Caveat emptor. Also will quash competition by adding vague regulations. Funds need lobbyists and lawyers to function. See Hester Pierce's blistering comment.
-see background information here |
||||
 Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
|
|
||||
 Darrell Duffie |
Stanford | Bio/Vote History | ||
|
There is empirical evidence, for example of Begenau and Siriwadane, that PE fees take advantage of some limited partners relative to others.
-see background information here |
||||
 Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
 Xavier Gabaix |
Harvard | Bio/Vote History | ||
|
|
||||
 Itay Goldstein |
UPenn Wharton | Did Not Answer | Bio/Vote History | |
|
|
||||
 John Graham |
Duke Fuqua | Bio/Vote History | ||
|
|
||||
 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
|
These investors are experienced and should be routine due diligence to ask about all fees before investing. If the fund gives them false information, the fund can be sued.
|
||||
 David Hirshleifer |
USC | Bio/Vote History | ||
|
|
||||
 Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
|
|
||||
 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
|
|
||||
 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
|
The rules impose meaningful costs that disadvantage smaller funds and new entrants. There is very little benefit. Most LPs are large and sophisticated or have sophisticated advisors.
|
||||
 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
|
|
||||
 Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
|
|
||||
 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
|
|
||||
 Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
|
|
||||
 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
|
This should lower investors' costs of comparing PE funds, and it should mitigate conflicts of interest (whereby fund managers give better terms to favored clients).
|
||||
 Sydney Ludvigson |
NYU | Bio/Vote History | ||
|
|
||||
 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
|
|
||||
 Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
 Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
|
|
||||
 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
|
The need for these rules seems unclear. The potential risks and harms outlined by the SEC in the final rule do not seem compelling.
|
||||
 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
|
The costs of reporting that include valuation of hard-to-value assets seem costly, particularly for small advisers, but transparency and most of the restrictions typically add value for investors. But we need research to measures and know costs and benefits.
|
||||
 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
|
Investment vehicles can be complicated and transparently describing costs may be difficult.
|
||||
 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
|
|
||||
 Manju Puri |
Duke Fuqua | Bio/Vote History | ||
|
High degree of uncertainty of the costs vs. benefits.
|
||||
 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
|
|
||||
 Paola Sapienza |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
 Amit Seru |
Stanford GSB | Bio/Vote History | ||
|
Potential inefficiencies (and rents) seem to be large in this sector.
|
||||
 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
|
|
||||
 Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
|
|
||||
 Jeremy Stein |
Harvard | Bio/Vote History | ||
|
|
||||
 Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
|
|
||||
 Amir Sufi |
Chicago Booth | Bio/Vote History | ||
|
|
||||
 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
|
|
||||
 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
|
While compliance is costly, the rule will bring more transparency, and competition to the PE space which will benefit a quickly growing customer base. Due diligence costs for investors will go down.
|
||||
 Toni Whited |
UMich Ross School | Bio/Vote History | ||
|
|
||||
Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
|
John Campbell |
Harvard | Bio/Vote History | ||
|
The SEC regulations are milder than those originally proposed and are unlikely to have a large impact on the industry.
|
||||
|
John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
|
Negative impact on industry, yes. Will turn it in to a few large more monopolistic firms that are good with regulators. Capital formation, no. This is expensive fingers on scales of bilateral negotiations of large institutions, won't affect stock prices or flow of investment.
|
||||
|
Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Darrell Duffie |
Stanford | Bio/Vote History | ||
|
More transparency of fees would stifle competition? That's not true in most other markets. E.g., price transparency in corporate bond markets has been shown to lower investors costs, on average. There is a risk, though, that entry into PE markets could be reduced by lower rents.
-see background information here |
||||
|
Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Xavier Gabaix |
Harvard | Bio/Vote History | ||
|
On the contrary – disclosures, if they’re not too costly, increase competition.
|
||||
|
Itay Goldstein |
UPenn Wharton | Did Not Answer | Bio/Vote History | |
|
|
||||
|
John Graham |
Duke Fuqua | Bio/Vote History | ||
|
|
||||
|
Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
|
|
||||
|
David Hirshleifer |
USC | Bio/Vote History | ||
|
|
||||
|
Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
|
|
||||
|
Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
|
Substantial is a high bar.
|
||||
|
Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
|
|
||||
|
Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
|
|
||||
|
Sydney Ludvigson |
NYU | Bio/Vote History | ||
|
|
||||
|
Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
|
|
||||
|
Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
|
|
||||
|
Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
|
The burden of the rules does not seem big enough to cause a substantial negative impact.
|
||||
|
Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
|
While there will be concerns in the industry about legal liability, these additional protections may also draw more investors in and more funds from existing investors. And if these are costs, finance will find a way to provide the funding.
|
||||
|
Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
|
The costs will disproportionally affect smaller managers or those who are developing non-traditional assets.
|
||||
|
Thomas Philippon |
NYU Stern | Bio/Vote History | ||
|
|
||||
|
Manju Puri |
Duke Fuqua | Bio/Vote History | ||
|
|
||||
|
Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
|
|
||||
|
Paola Sapienza |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Amit Seru |
Stanford GSB | Bio/Vote History | ||
|
|
||||
|
Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
|
|
||||
|
Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Jeremy Stein |
Harvard | Bio/Vote History | ||
|
|
||||
|
Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Amir Sufi |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
|
|
||||
|
Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
|
Specialized auditors will develop to do this reporting work efficiently after an initial period of start-up costs.
|
||||
|
Toni Whited |
UMich Ross School | Bio/Vote History | ||
|
|
||||
Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
|
John Campbell |
Harvard | Bio/Vote History | ||
|
Sophistication is a relative term, and while private LP's are more sophisticated than retail mutual fund investors, they can still benefit from transparency regulation.
|
||||
|
John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
|
Regulalors always underestimate heterogeneity. These are sophisticated investors. Smaller investors do cost more.
|
||||
|
Francesca Cornelli |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Darrell Duffie |
Stanford | Bio/Vote History | ||
|
Is there a market failure? Maybe. Investors that have enough wealth are deemed "sophisticated,' but need not be, and can be exploited. Mandatory transparency can help, and can increase competition.
-see background information here |
||||
|
Janice Eberly |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Xavier Gabaix |
Harvard | Bio/Vote History | ||
|
It’s a tough call, but a priori many investors are not so sophisticated. And markets with “shrouded attributes” are inefficient if a too large fraction of clients are unsophisticated.
-see background information here |
||||
|
Itay Goldstein |
UPenn Wharton | Did Not Answer | Bio/Vote History | |
|
|
||||
|
John Graham |
Duke Fuqua | Bio/Vote History | ||
|
|
||||
|
Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
|
The original 1933 act was designed to protect retail investors. Sophisticated investors should know better.
|
||||
|
David Hirshleifer |
USC | Bio/Vote History | ||
|
|
||||
|
Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
|
|
||||
|
Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Ralph Koijen |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
|
|
||||
|
Andrew Lo |
MIT Sloan | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
|
There is substantial heterogeneity in the level of investor sophistication, even among this set of investors. Also, even sophisticated investors can incur substantial costs to 'learn' the true costs of these funds
|
||||
|
Sydney Ludvigson |
NYU | Bio/Vote History | ||
|
|
||||
|
Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
|
|
||||
|
Gregor Matvos |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Tobias Moskowitz |
Yale School of Management | Bio/Vote History | ||
|
It is appropriate to impose these rules, which are about transparency, even if the investors are "sophisticated", though I'm not sure how "sophisticated" they really are.
|
||||
|
Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
|
Rich does not mean sophisticated.
|
||||
|
Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
|
The resources of the SEC are limited and best used to protect retail investors.
|
||||
|
Thomas Philippon |
NYU Stern | Bio/Vote History | ||
|
|
||||
|
Manju Puri |
Duke Fuqua | Bio/Vote History | ||
|
|
||||
|
Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
|
|
||||
|
Paola Sapienza |
Northwestern Kellogg | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Amit Seru |
Stanford GSB | Bio/Vote History | ||
|
Not all LPs are sophisticated. And even sophisticated ones can benefit from shopping efficiently (knowing the menu).
|
||||
|
Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
|
The LPs, as qualified purchasers, may well be "sophisticated," but that does not imply they otherwise receive the relevant information at issue here.
|
||||
|
Laura Starks |
UT Austin McCombs | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Jeremy Stein |
Harvard | Bio/Vote History | ||
|
|
||||
|
Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
|
|
||||
|
Amir Sufi |
Chicago Booth | Bio/Vote History | ||
|
|
||||
|
Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
|
|
||||
|
Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
|
Many institutional investors lack the resources (especially human capital and time) to do thorough due diligence. And there is enormous duplication of effort. With rising private asset ownership, more investor protection is warranted.
|
||||
|
Toni Whited |
UMich Ross School | Bio/Vote History | ||
|
|
||||
