AIMA Takes Aim at SEC Chair

It is not only the crypto industry that has an issue with US Securities & Exchange Commission chair Gary Gensler, in a blog post, the CEO of the Alternative Investment Managers Association (AIMA) has taken aim suggesting Gensler “persists on a crusade that lacks merit”.

In the blog, Jack Inglis, AIMA’s CEO, rails against the suggestion that the SEC needs to up its scrutiny of hedge funds following the recent bond market turmoil, as per a report in the Financial Times at the weekend. He also notes the “sensationalist thirst” in the media to resurrect the ‘shadow banking’ label and suggest lurking systemic risks within the asset management sector.

Observing that Gensler referred to the bond market volatility as “once in a generation”, Inglis writes, “Of course, government bonds are going to rally sharply when a bank collapses (SVB); it’s called a flight to quality.”

He points out, however that there were no major casualties at hedge funds, markets continued to function, trades settled, and margin calls were met. “Agreed, some fund strategies experienced losses during the period but they were well within investor tolerance levels and were mainly in funds that had delivered superior performances in the past 12 months,” he adds. “There was no “run on a fund” (that can’t happen anyway; investor funds don’t have the same immediate accessibility as bank deposits) and no government intervention or bail-out. Not bad for a supposed “once in a generation” event.”

Inglis stresses the number of comments from FT readers, taking issue with Gensler’s comments and takes this as evidence that there is widespread scepticism over their accuracy, before accepting that regulators should have sufficient information to help them identify risks that could potentially destabilise the system. He observes that fund managers “already provide a lot”, and then adds, “But first, identify a problem that exists before trying to fit a solution to it.”
On shadow banking, Inglis believes this “murky item” should be “consigned to the bin”
pointing out that another editorial piece in the FT last week ran with the title ‘Taming the shadow banks’, thus “further milking this weary misconception”.

Inglis concludes, “None of this is new. Just before the global financial crisis, G7 finance ministers spent more time at a 2007 meeting discussing risk in hedge funds than in the banking system and look how that turned out.”