March 30, 2015

VIA EMAIL

Christopher Stein Balance of Payments Division Bureau of Economic Analysis Department of Commerce Washington, DC 20230

Paul Bugg
PRA Desk Officer for BEA Paperwork Reduc tion Project 0608

- 0062 Office of Management and Budget Washington, DC 20503

Re: International Services Surveys: BE

- 180, Benchmark Survey of Financial Services Transactions Between U.S. Financial Services Providers and Foreign

Persons ; Bureau of Economic A nalysis; RIN 0691

- AA84

Dear M r. Stein and Mr. Bugg :

Managed Funds Association (“MFA”) 1 appreciates the opportunity to provide comment s to the Bureau of Economic Analysis (“BEA”) regarding its proposed changes to the entities that
must submit t he BE

– 180

, Benchmark Survey of Financial Services Transactions Between U.S. Financial Services Providers and Foreign Persons (“Form BE

- 180 ”). 2 The propos al would amend existing regulations to require that all entities subject to the r eporting thresholds submit the Form,
whether or not the BEA contact s the m individually

. If the BEA adopts the changes as proposed

, the Form BE

- 180 would differ from other BEA surveys , which only require persons subject to the reporting thresholds to respond if the BEA contacts them.

1 The Managed Funds Association ( “ MFA ” ) represents the global alternative investment industry and its investors by advocating for sound industr y practices and public policies that foster efficient, transparent, and fair capital markets. MFA, based in Washington, DC, is an advocacy, education, and communications organization established to enable hedge fund and managed futures firms in the alterna tive investment industry to participate in public policy discourse, share best practices and learn from peers, and communicate the industry’s contributions to the global economy. MFA members help pension plans, university endowments, charitable organizatio ns, qualified individuals and other institutional investors to diversify their investments, manage risk, and generate attractive returns. MFA has cultivated a global membership and actively engages with regulators and policy makers in Asia, Europe, the Ame ricas, Australia and all other regions where MFA members are market participants.

2 80 F.R. 4228 ( Jan

. 27 , 201 5 ). The Form require s responses from U.S. financial service providers that, during their 2014 fiscal year, had financial transactions totaling $3 million or more on a consolidated basis directly with

non

- U.S. persons.March 30, 2015

Page 2 of 6

The proposal also request s comment on: (i) w hether the information is necessary for the

proper p erformance of the functions of the BEA

, including whether the information will have practical utility; ( ii ) the accuracy of the BEA ’s burden estimate; ( iii) way s to enhance the quality, utility, and clarity of the information collected; and ( iv ) ways to minimize the burden of the
collection of information on respondents.

The BEA Should Maintain the Existing Filing Requirements of Form BE

- 180

We appreciate th e important role of the BEA and its data collection in understanding and analyzing the scope of transactions with foreign entities

, and we recognize the value of this
information for various policy

- making determinations . In our view, however, the informat ion that hedge fund managers would report to the BEA would be of limited usefulness relative to the
burden to obtain and submit the information . Hedge funds engage in transactions with a wide range of global counterparties, and generally do not compile the informa tion in the manner required to be reported in the Form in the normal course of their business activities

.

Because such reporting would impose substantial costs and burdens on individual hedge
fund managers , we respectfully recommend that the BEA maintain its existing reporting requirements for Form BE

- 180, whereby only entities that the BEA individually contacts are required to submit the Form, and e ntities that the BEA does not contact have no reporting responsibilities

. We outline the reasons for our views below.

Discussion

Hedge funds are private pools of investor capital that are managed by a separate entity,
called a n investment manager. 3 Investors in hedge funds include taxable U.S. investors, tax

exempt U.S. investors

, and non

- U.S. investors. In or der to satisfy the requirements of each of these types of investors, and to provide the most favorable tax treatment for their investments, a U.S. fund manager generally will manage investor capital through both U.S.

- domiciled fund s and

non

- U.S.

- domiciled fund s

. 4 Other structures often also include entities referred to as special

purpose vehicles (SPVs). 5 The U.S. investment manager , or an affiliate of the manager, operates and controls each of the funds, and typically organizes them in structure s that ar e appropriate to
the needs of the manager and fund i nvestors.

H edge funds engage in a wide range of transactions with numerous entities, including prime brokers, counterparties, administrators, custodians, financial institutions, investors,
investment man agers, service providers , and other market participants . Many of these firms are

3 Hedge fund managers generally must register as investment advisers with the SEC and file information about

their business es on Form ADV. Most SEC

- registered hedge fund managers mu st also submit extensive information to the SEC about hedge funds they manage on Form PF, which is filed on a quarterly or annual

basis.

4 Typically, a U.S. fund is organized either as a limited partnership or limited liability company, and a non

- U.S.
fun d is often organized as a corporation or similar entity.

5 SPVs are often entities owned by the master fund in the master

- feeder structure

. SPVs d o not typically have employees o r conduct business activities. As a result, similar to investment funds, information relating to SPVs may not be representative of the types of investment flows that the Forms seek to measure

.March 30, 2015

Page 3 of 6

global institutions that have complex organization al structures which include both U.S. and non

U.S. legal entities. Hedge funds often engage in a variety of transactions wi th these types of entities, and the particular legal entity with which a fund transacts is often determined by the
financial institution for a variety of business and regulatory reasons

. The Form would require a hedge fund manager to report information de pending on the domicile of the particular legal entity of an institution that is engaged in a transaction. For example, a transaction between a U.S. hedge fund and a U.S. entity of a financial institution may not be reported on the Form, whereas a

transac tion with a non

- U.S. entity of the institutional may be reported. In the latter instance, a manager would need to report a country for each applicable transaction. We believe that in many

ca ses, in making these determinations a manager would need to estab lish a set of assumptions regarding how it would report information. In our view, a likely result would be that managers would have to report a wide range of transactions and would do so in disparate ways.

A ccordingly

, we believe that the information would be dependent on their underlying assumptions and the aggregated data would be of limited value to the BEA

.

Moreover

, it would be challenging for a hedge fund manager to track and report the requested transactional information with respect to foreign banks, prime brokers and certain other counterparties. The Form would require a manager to identify the legal entity in institutions with which each transaction occurs, and then assign an applicable country to each transaction. Managers generally do not currently collect this type of information, and they would need to develop procedures to maintai n this da ta. In some cases, for example, it will not be clear how to determine the appropriate country to use for purposes of the Form, as some transactions involve entities that have various jurisdictions in which they operate and conduct business. W e believe

re quiring managers to perform s uch an analysis would impose a substantial burden on them due to the number of transactions and the complexity of the institutions with which funds typically

transact

.

Accordingly

, managers would need to dedicate valuable i nternal resources to complet ing
the Form. The BEA estimates that the average respondent burden would be ten hours , which
would i nclud e time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and complet ing and reviewing the collection of information

. 6 We believe ten hours is a gross underestimation of the average time that it would take a hedge fund manager to complete the Form. A s described above, a hedge fund manager and its affiliated
entities often manage multiple hedge funds

, which would increase the burden on a manager to determine the information that would need to be reported.

In addition to Form BE

- 180, we note that hedge fund managers may also be subject to reporting on other BEA forms

. 7 In evaluating the burden of additional reporting on Form BE

- 180

,

w e encourage the BEA to consider the totality of the time and expense for managers to complet e the se f orm s . For example, we previously estimated the average cost for a manager to complete

Form BE

- 10 as between $36,000 and $72,000

. 8 Perhaps more significantly, these F orms require

6 80 F.R. at 4228.

7 For example, Form BE

- 10, Form BE

- 11, Form BE

- 13 and Form BE

- 577

.

8 These amounts are based on the BEA’s averag e respondent burden of 144 hours, and MFA ’s estimates of the total cost of the personnel time, potential outside accounting and legal time, and incidentals for completing each

Form BE

- 10

, to be between $250 and $500 per hours. MFA’s estimates are based on the typical internalMarch 30, 2015

Page 4 of 6

managers to dedicate valuable internal resources that are otherwise being used for the benefit of

fund investors. M uch of the information provided by hedge fund manag ers on Form BE

- 180 and
other BEA f

orms does not provide substantial value

- added information

, and MFA believes that
the time and cost burdens imposed by the various f orms far outweigh any benefit to the BEA.

For these reasons, w e respectfully recommend t hat the BEA maintain its existing reporting requirements for Form BE

- 180, whereby only entities that the BEA individually contacts are required to submit the Form, and e ntities that the BEA does not contact have no reporting responsibilities.

The BEA Shou ld Not Extend the Reporting Requirements of Other Forms to Hedge Fund Managers

At a minimum, r egardless of the BEA’s determination of the reporting requirements for

Form BE

- 180, we strongly urge the BEA not to extend the reporting requirements of other BE A
forms to entities not contacted by the BEA

. We have previously submitted comments explaining

that requiring hedge fund managers to submit other BEA form s would only provide information
of limited usefulness to the BEA’s mission

. 9 We continue to believe that the BEA should maintain its existing reporting requirements for other types of forms, such as Form BE

- 11 and

Form BE

- 577, such that entities not contacted by the BEA have no reporting responsibilities

.

In particular, applying a universal filing re quirement to forms that are due annually or quarterly would only lead to additional costs and burdens for hedge funds while providing limited
benefit to the BEA. In addition to Forms BE

- 11 and BE

- 577, f or the reasons described above, we respectfully urge the BEA to maintain the existing requirements for Form BE

- 185, which requires
that filers submit information similar to Form BE

- 180 on a quarterly basis. A quarterly filing requirement would impose a significantly greater burden on managers as compared to a filing every five years.

* * * * * * *

employee salaries or hourly rates of external personnel who are most likely to be involved in complet ing the

Form

. Where a particular manager’s costs would fall on this range would depend on the variety of fund

structures under that ad viser’s management, the amount of outside legal or accounting advice a particular manager decided to seek, and the seniority of the internal personnel who must become involved in completing, reviewing, and approving the Form.

9 Letter from Stuart J. Kaswe ll, Executive Vice President & Managing Director, General Counsel, MFA, to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce (Sept. 9, 2013), available

at: https://www.managedfunds.org/wp

- content/uploads/2013/09/MFA

- Comments

- on

- BEA

- Surveys

- BE

- 11

- and

BE

- 577.pdf

.March 30, 2015

Page 5 of 6

We would be happy to further discuss any of the above information with you or your colleagues. If you have any questions about these comments, or if we can provide further information, please do not h esitate to contact Matthew Newell, Associate General Counsel, or the undersigned at (202) 730

- 2600.

Respectfully submitted,

/s/ Stuart J. Kaswell

Stuart J. Kaswell Executive Vice President & Managing Director,
General CounselMarch 30, 2015

Page 6 of 6

Appendix

*An SPV structure would typically be located beneath the Master Fund and above the

Investments.