Private Investment SubCommittee Update

SEC Asset Management Advisory Committee - 27th

May 2020
Agenda

 Sub-Committee Members

 The “supply” and “demand” dynamics for asset 

management product / services

 Our key guiding principle

 Workstreams

 Measuring full cycle returns from private 

investments

 Understanding the current exemptions and 

restrictions for access to various private 

investments

 Next Steps
Members

 Rama Subramaniam –GTS (Chair)

 Adeel Jivraj – Ernst & Young LLP

 Erik Sirri - Babson College and Natixis Funds, 

Loomis Sayles Funds, and Natixis ETFs

 Joe Savage - FINRA 

 John Bajkowski -American Association of 

Individual Investors

 John Suydam –Apollo Global Management
Demand Side

Content from 1stAMAC meeting – 14th January 2020

Michael L. Goldstein – FMMI Inc
0

50

100

150

200

250

0

5

10

15

20

25

30

35

40

45

50

2002 2010 2019E

As a Share of GDP

Total Assets

U.S. Money Management Industry Assets

Total and as a Share of GDP

2002 Through 2019E

Total Assets As a Share of GDP

$ Trillion %

The U.S. Industry is Around $45 Trillion in Size...
Defined-Benefit Plans2

Endowments

Foundations

Insurance

Company

Outsourcing

DefinedContribution

Plans

IRAs

Retail Mutual Funds

Variable Annuities3

Separate Accounts

ETFs

Bank Personal Trusts

College Savings Plans

Alternatives

The U.S. Money Management Industry

Sources of Assets Under Management1

2018

1 Not including federal government pension plans.

2 Excludes unfunded portion.

3 Excludes variable annuities held in defined-contribution and IRA retirement plans.

Institutional

Investors'

Assets

Retail

Investors'

Assets

Other 

Retirement

Assets

...And It Has a Retail Character...
0

10

20

30

40

50

60

70

80

90

100

2000 2010 2018

The U.S. Money Management Industry

Composition of Assets Under Management

2000 Through 2018 

Defined-Benefit Pension Plans Other Institutional Categories1

Defined-Contribution Plans2 IRA Accounts

Retail Mutual Funds/ETFs and Others3 Retail Separate Accounts, Trusts and Alternatives

1 Endowments, foundations and outsourced insurance assets.

2 Includes 401(k), 403(B), 457 and union defined-contribution plans.

3 Includes variable annuities and college savings plans.

4 Includes hedge funds and private equity funds.

%

4

Institutional

Investors

Other

Retirement

Assets

Retail

Investors

...That’s Increased Over Time...
0

5

10

15

20

25

30

35

75 77 79 81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17

Corporate Defined-Benefit Plans

Number of Participants

1975 Through 2017 Million

Active 

Participants

2017

...As the ERISA Era Has Come Full Circle
Supply Side
Listed U.S. Companies & Mariket Capitalization 

9000 3S 

8000 

$30 

7000 

5000 .o 

4000 

3000 

10 

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Key Guiding 

Principle

 Our key guiding principle and our “North star” 

will be the best interest of Main Street 

investors. 

 That best interest will include balancing

protections for the investor with opportunity 

and access to a wider range of investments.
Workstream 1 –

Measuring full 

cycle returns 

from private 

investments

 Private investments should provide 

diversifying and /or additive returns over a full 

investment cycle to a typical public market 

portfolio or when compared to public market 

benchmarks

 Survey prior academic studies

 Initial work by Erik Sirri has shown limited useful 

studies

 Engaging with SEC DERA unit to determine the 

availability of academic literature regarding 

potential effects from including private 

investments in individual investor portfolios

 Seek out industry data providers such as 

Hamilton Lane and Cambridge Partners and 

analyze the data

 Expect inherent limitations in comparability

 Prefer data that we can analyze ourselves (might 

request DERA assistance)
Workstream 2–

Understanding 

the current 

exemptions 

and restrictions

 We are reviewing several SEC releases 

including:

 Concept Release on Harmonization of Securities 

Offering Exemptions – June 2019

 Proposed to simplify, harmonize, and improve 

certain aspects of the exempt offering 

framework to promote capital formation while 

preserving or enhancing important investor 

protections – March 2020

 Proposed rule to amend ‘accredited investor’ 

definition – Dec 2019

 Evaluating these in terms of private 

investment asset classes

 “Evolutionary” changes vs “Revolutionary” 

changes
Next Steps

 Complete academic survey of private investment 

returns and share initial conclusions

 Collect data from industry providers and review 

any similar analysis they have done

 Confirm approach to analyze data collected

 Summarize current exemption and access 

framework for main asset classes

 Private equity (distinguish between early stage, 

growth, late stage potentially)

 Real Estate

 Private Debt

 Others?
Questions and 

Comments
References 

and Materials

 CaseyQuirk-Deloitte US Asset Management 

Comments

 Empirical Research – Issues Facing U.S. Money 

Management Industry

 McKinsey & Company –Global Trends in Asset 

Management

 Concept Release on Harmonization of Securities 

Offering Exemptions (June 2019) 

 Proposing Release, Facilitating Capital Formation and 

Expanding Investment Opportunities by Improving 

Access to Capital in Private Market (March 2020)