US Fund Association Elects New Board Amid Looming Tax and Regulatory Challenges

The Managed Funds Association (MFA), a prominent trade group for alternative asset management, has appointed a new board of directors, led by Jody Gunderson, as the industry braces for potential tax increases and regulatory changes. This transition comes at a critical time as the U.S. prepares for a presidential election and discussions surrounding an expiring tax bill in 2025.

Key Takeaways

• Jody Gunderson appointed as new chair of the Managed Funds Association.
• The MFA represents $3.2 trillion in assets managed by hedge funds and private equity firms.
• Upcoming federal changes may impact the regulatory landscape, including the SEC.
• The industry is preparing for potential tax increases on carried interest income.

New Leadership in the MFA

Jody Gunderson, managing principal at AB CarVal, takes over from Natalie Birrell, the former chair. Gunderson emphasized the need for the MFA to strategize for various scenarios that may arise in the coming years. The new board aims to advance the interests of the alternative asset industry, which has faced significant regulatory scrutiny.

Regulatory Landscape and Challenges

The MFA has recently achieved a notable victory against the SEC, with a U.S. appeals court overturning a rule that imposed stricter oversight on private funds. This ruling is seen as a setback for SEC Chair Gary Gensler's efforts to enhance transparency and eliminate conflicts of interest in the financial sector.

In addition to the recent court ruling, the MFA has initiated lawsuits against the SEC regarding:

1. A rule requiring firms dealing in government bonds to register as broker-dealers.
2. A rule aimed at increasing transparency in short-selling practices.

Both cases are still pending, and the outcomes could significantly influence the regulatory environment for alternative asset managers.

Upcoming Proposals and Industry Concerns

As the MFA looks ahead, it faces several proposed regulations that could impact its members:

• Cybersecurity Rule: This would mandate that advisers and funds implement written cybersecurity policies to address risks.
• Outsourcing Rule: This proposal would prohibit advisers from outsourcing certain investment services.

The alternative asset industry has expressed strong opposition to both proposals, viewing them as unnecessary burdens that could hinder operational flexibility.

The Tax Debate Ahead

With the 2025 tax bill expiration approaching, discussions around tax increases, particularly on carried interest income, are expected to intensify. Carried interest allows many private fund managers to benefit from lower capital gains tax rates, a longstanding tax break that may be scrutinized in upcoming legislative sessions.

Bryan Corbett, MFA's CEO, highlighted that the upcoming presidential election and new Congress will significantly influence the association's advocacy strategies. The potential for tax reform will be a central focus as the MFA navigates these changes.

International Advocacy Efforts

The MFA has also expanded its reach internationally, opening offices in London and Brussels in recent years. Corbett noted that the focus will be on ensuring that private funds are not regulated as banks, a concern that has gained traction in Europe.

As the alternative asset management industry prepares for these challenges, the newly elected board under Gunderson's leadership aims to position itself effectively in a rapidly changing landscape, advocating for policies that support growth and innovation in the sector.

Sources

• US fund association picks new board as risks loom of higher tax, new regulations, Yahoo Finance Canada.