Private funds operators are not exactly falling over themselves to take advantage of the newfound permissions to market their offerings to the public under the JOBS Act, according to an article in Hedge Fund Alert.
The JOBS Act removed a ban on advertising for private funds, and effective September 23, hedge fund firms and alternative-investment managers are free to advertise their capital offerings in the print, broadcast and online media.
Private funds: The numbers
Hedge Fund Alert (HFA) analyzed about 209 Forms D filed after September 23, looking for those that declared an intention to exercise their rights under the JOBS Act.
Only 12, or less than 6%, said they would do so. Interestingly, most of these were very new startups with no record of previous capital raisings. True, these were really the kind of entities targeted by the JOBS Act, but the near absence of established players looking to take advantage of the new relaxations raised a question mark. Were there any other factors at play, other than the obvious fact that these well-known entities needed no advertising support?
Private funds: Legal hurdles
Some of these funds that said ‘No, thank you’ to advertising were the veritable Who’s Who of the funds industry – AllianceBernstein Holding LP (NYSE:AB), AQR Capital, Bayview Capital, The Blackstone Group L.P. (NYSE:BX), Carlyle Group LP (NASDAQ:CG), Chilton Investment, Fortress Investment Group LLC (NYSE:FIG), Lansdowne Partners, Marathon Asset Management and Two Sigma Investments.
On closer examination, HFA found that part of the reason might lie at the door of legal uncertainty – such as from proposed SEC rules that could put some onerous compliance demands on JOBS-availing funds.
Private funds: Regulators’ turfs
The legal connotations apart, futures regulator CFTC’s regulations still prohibit registered entities from marketing to the general public. This apparent contradiction between the SEC and the CFTC, and the reluctance of the latter to ‘conform’ with the SEC, indicates that regulators are perhaps still wary of the liberalization under the JOBS Act, and therefore continue to accord a higher priority to investor protection.