What You Need to Know
- Approximately 35% of all SEC-registered advisors manage approximately $18 trillion in private fund assets.
- Some private fund advisors provided to investors or prospective investors misleading track records.
- The size and complexity of private fund advisors vary widely.
The Securities and Exchange Commission released Thursday a risk alert detailing concerns found among private fund advisors during exams.
The alert details more observations found by SEC exam staff regarding private fund advisors’ failure to act consistently with disclosures, use of misleading disclosures regarding performance and marketing, due diligence failures relating to investments or service providers, and use of potentially misleading “hedge” clauses.
“Examinations of private fund advisers have resulted in a range of actions, including deficiency letters and, where appropriate, referrals to the Division of Enforcement,” the alert states.
As the alert states, more than 5,000 SEC-registered investment advisors, approximately 35% of all SEC-registered advisors, manage approximately $18 trillion in private fund assets.
“In the past five years alone, we have observed substantial growth in reported private fund assets, which have increased by 70% in that period,” the SEC said. “These assets are deployed through a variety of investment strategies employed by hedge funds, private equity funds, and real estate-related funds, among others.”