Asset managers — the Volcker Rule’s relevance

Much has been written in the short time since the adoption in December 2013 of final regulations implementing the Volcker Rule about the rule’s restrictions on the ability of banking entities to sponsor and invest in ownership interests in private equity or hedge funds or other ‘covered funds’ as defined in the rule.

Less attention has been paid to the impact of the Volcker Rule on asset managers who are not banking entities subject to the rule, who now face the loss of a significant source of capital and buy-side liquidity for the funds they manage.

Many banking entities affected by the Volcker Rule are already refraining from investing in private equity and hedge funds or have already withdrawn their investments, while others are asking asset managers for investment solutions that permit their continued investment. Asset managers who understand the Volcker Rule and can design and operate new investment vehicles that are Volcker compliant will be positioned to maintain some access to the significant source of capital that banking entities can provide…

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