February 9, 2011

Via Electronic Mail:

The Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Proposed Definition of Fiduciary Regulation

Room N-5655

U.S. Department of Labor

200 Constitution Avenue, N.W.

Washington, DC 20210

Re: Request to testify at Hearing Regarding the Proposed Definition of 

Fiduciary Regulation

Ladies and Gentlemen:

Managed Funds Association (“MFA”)1respectfully requests an opportunity to 

testify at the Department of Labor’s (the “Department”) hearing on March 1, 2011. In 

our testimony, we expect to address the following issues, each of which was addressed in 

more detail in a February 3 comment letter in response to the Department’s proposed 

regulation redefining an investment advice fiduciary under section 3(21) of the Employee 

Retirement Income Security Act of 1974 (“ERISA”):

 Hedge funds are a key component of the investment portfolio of many benefit 

plans because hedge funds provide diversification, risk management and riskadjusted returns that are not correlated to traditional asset classes.

 In 2006, Congress determined that general partners, managing members, advisers, 

or other service providers to pooled investment funds with less than 25% ERISA 

investors should not be fiduciaries under ERISA. We do not believe the proposed 

rule should be interpreted in a way that would make these persons become 

fiduciaries with respect to their activities in connection with funds that comply 

with the Congressionally determined de minimis test.

 

1 MFA is the voice of the global alternative investment industry. Its members are professionals in hedge 

funds, funds of funds and managed futures funds, as well as industry service providers. Established in 

1991, MFA is the primary source of information for policy makers and the media and the leading advocate 

for sound business practices and industry growth. MFA members include the vast majority of the largest 

hedge fund groups in the world who manage a substantial portion of the approximately $1.9 trillion 

invested in absolute return strategies. MFA is headquartered in Washington, D.C., with an office in New 

York.
February 9, 2011

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 We do not believe that general partners, managing members, advisers, or other 

service providers to pooled investment funds should become fiduciaries solely 

because they provide reports to investors and prospective investors with the net 

asset value of the pooled fund.

 Several technical changes to the language in the definition of “fiduciary” could 

make managers or others become fiduciaries without knowing or intending to do 

so. Those changes include: (1) deleting the language that the agreement, 

arrangement or understanding between a service provider and a plan be mutual; 

(2) changing the test that advice be a primary basis for a plan’s investment 

decision to requiring only that advice “may be considered” by the plan; and (3) 

removing a requirement that advice be individualized or tailored to a plan. While 

the DOL may not have intended these changes to have such broad reaching 

effects, the broad language in the proposed rule creates uncertainty as to the scope 

of people who will be affected.

 It is unclear the extent to which service providers (e.g., prime brokers, swap 

counterparties, administrators) to pooled investment funds might be deemed 

fiduciaries under the proposed rule and it is important for the DOL to implement 

any changes to the definition of fiduciary (or provide appropriate exemptions or 

exceptions) in a way that allows funds to enter into these normal financial 

transactions on commercially reasonable terms.

 The selling exception in the proposed rule should be revised to cover the normal 

marketing activities of pooled investment funds.

 The definition of “fees” should be revised to clarify that market participants 

would not have to aggregate unrelated transactions for purposes of determining 

fiduciary status.

Given the potential implications of the Department’s proposal, MFA would 

appreciate the opportunity to testify at the March 1 hearing and elaborate on the above 

issues. MFA strongly supports the DOL’s goal of protecting benefit plans and their 

participants, and we recognize that imposing fiduciary status on certain service providers 

to plans furthers that goal. We welcome the opportunity to work with the Department as 

it considers this important topic.

If you have any questions regarding the outline of MFA’s testimony, or if we can 

provide further information with respect to these or other regulatory issues, please do not 

hesitate to contact Stuart J. Kaswell or me at (202) 730-2600.

Respectfully submitted,

/s/ Richard H. Baker

Richard H. Baker

President and CEO