Lobbyists for some of Wall Street’s biggest alternative asset managers are asking regulators to relax rules preventing the buying and selling of assets between funds overseen by the same company, a move they say will boost the adoption of private assets in retirement accounts.
The Alternative Investment Management Association, which represents firms including Blackstone Inc. and Apollo Global Management Inc., is encouraging the Securities and Exchange Commission to lift the current ban on so-called cross-trading in private assets, according to an email shared with members seen by Bloomberg News.
The effort comes as alternative asset managers prepare to push into 401(k)s and similar retirement savings plans. Last month, the Department of Labor released draft guidance that would blunt the threat of class-action litigation for employers who offer private credit, equity and other illiquid assets in workplace plans.
Though the 401(k) guidance is “a step in the right direction,” AIMA Deputy Chief Executive Officer Jiri Krol called on the SEC to join the reform effort by allowing cross-trading in vehicles such as interval funds and business development companies, a type of private credit fund for retail investors.
“The rule limits the ability of registered funds, including interval funds and BDCs, to engage in cross-trading with affiliated private funds, even where such transactions could improve portfolio construction and liquidity management,” Krol said in the letter.
The current rules limit cross-trading to securities with “readily available market quotations” and demand that “the trade be executed at the ‘independent current market price,’” which curbs the ability to trade private assets as well as fixed income and other alternatives. Advocates for the industry say relaxing the rules would make it easier for funds to return cash to investors, and enable private funds to sell their holdings to affiliated retail funds.
For the private credit industry, access to retirement savers and fewer restrictions on trading can’t come soon enough. Firms including Apollo, Blackstone, Carlyle Group Inc. and Blue Owl Capital Inc. are grappling with a surge in redemption requests from funds aimed at retail investors; an influx of cash from retirement plans could help stem the outflows.
SEC commissioners and senior Treasury officials have been meeting regularly with industry players to discuss the growth of private credit and what the right regulatory framework is for this market, Krol’s letter said.
AIMA earlier asked the SEC to allow cross-trading of private assets several months ago but sees new momentum following the Trump administration’s push for more alternative assets in retirement plans.
The SEC declined to comment. The cross-trading rule is currently in the agency’s regulatory flexibility agenda, which outlines some of its priorities.
While alternative asset managers publicly cheered the DOL’s directions, in private many found the guidance in need of improvement, according to people familiar with their thinking who asked not to be named as these conversations are private. Getting the SEC more involved in various parts of rulemaking is among possible suggestions, the people said.
Executives from across the industry are currently working on their responses to the DOL’s proposal, which are due by June 1.
Law firm Davis Polk, which advises prominent private assets firms in their push for the retail market, is also planning to encourage the SEC to change cross-trading rules.
“An obvious step would be to enhance the ability of regulated funds to generate liquidity for plan participants by expanding the SEC’s cross-trading rules to permit purchases and sales of illiquid and other investments with affiliates, with appropriate safeguards,” said Christopher Healey, partner at Davis Polk.
Industry groups such as the Investment Company Institute have lobbied for similar reforms, asking the SEC to allow cross-trading of fixed-income securities after the agency severely restricted it in 2020.
Written by: Loukia Gyftopoulou and Lydia Beyoud — With assistance from Stefani Reynolds @Bloomberg
The post “Wall Street Group Urges SEC to Lift Private Asset Trading Ban” first appeared on Bloomberg