Speaking at the recent conference on Emerging Trends in Asset Management hosted by the SEC’s Division of Investment Management, the Director the Division of Investment Management Natasha Vij Greiner cited a number of statistics from the SEC’s recently published “Registered Fund Statistics.”  She cited the rapid growth of the asset management industry—now comprised of more than 15,000 investment advisers reporting in aggregated approximately $129 trillion in assets under management.  There were several common themes in the Director’s remarks and in those made by Chair Gensler, which are grouped below.  

• Continued growth and importance of private funds and private markets:  the Director noted that many advisers are advisers to private funds, which have tripled in number in the past decade from 30,000 to 90,000.  The focus on private funds and on the private markets was a notable theme throughout the conference.  For example, in her remarks, the Director pointed out that alternative investments have grown, including private market securities and loans.  She cited the SEC’s DERA statistics that, in 2022, exempt offerings raised $3.7 trillion of new capital, compared to the $1.0 trillion raised in registered offerings.  Consequently, investors are allocating assets to private funds by investing directly through products offered to accredited investors or qualified purchasers, or indirectly through pension fund investments.  In his comments, Chair Gensler focused on the growth of the private credit market and the reliance on leverage, with its accompanying risks

• SMAs and CITs:  Both the Director and Chair addressed the growth in institutional and retail separately managed accounts (SMAs) and collective investment trusts (CITs).  In his remarks, Chair Gensler noted that today, there are more than 54 million separately managed accounts and that in the last 15 years, the number doubled.  He attributed much of the growth to the rise of robo-advisers.  He pointed out that SMAs now represent more than $49 trillion in assets, up nearly 50 percent in the last five years.  Both the Director and the Chair referenced the growth in CITs.  The Chair noted that the SEC staff has been discussing CITs with bank regulators since these are exempt from SEC oversight.  He estimated that CIT funds are approximately $7 trillion, $5 trillion at the federal level and $2 trillion at the state bank level.  He cautioned that there may be risks associated with this rapid growth and with “regulatory gaps.”

• Index or “passive” products:  The Director observed that this year marks the 100th anniversary of the formation of the first mutual fund.  While at the end of 1940, mutual funds had aggregate assets of $448 million and commercial banks had $70.7 billion, today, registered funds (including mutual funds), hold more than $32 trillion, and commercial bank total assets are $23 trillion.  Investors can choose from over 12,000 registered funds, of which approximately 9,000 are mutual funds and 3,000 are exchange traded funds.

• RFC on Index Providers, Pricing Services, etc.:  Chair Gensler commented at length on the growth of passive investment strategies—noting that these stand at $12 trillion, versus actively managed funds at $14 trillion.  The three large ETFs, he pointed out, manage nearly 75 percent of the more than $7 trillion in net assets.  Unfortunately, this led to an update:  Chair Gensler noted that the SEC Staff is considering comments on the SEC’s request for comment on whether index providers, model portfolio providers and pricing services may be acting as investment advisers.  So, it would appear that there will be more to come.

• Technology:  Of course, much of the attention was focused on technology and the use of artificial intelligence and machine learning, and the possibility of a re-proposal of the controversial predictive data analytics rule proposal.

Access the Director’s remarks and the Chair’s remarks. The full report is available here.

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