TLDR:
- SEC’s new private fund adviser rules impact emerging fund managers
- Preferential Treatment Rule restricts offering favorable arrangements to select investors
Analyzing the new private fund adviser rules adopted by the SEC reveals a significant impact on emerging fund managers in the private fund industry. One of the rules, known as the Preferential Treatment Rule, prohibits private fund advisers from offering preferential deal terms to select investors without providing advanced written notice to other investors. This rule may hinder emerging fund managers in attracting anchor investors and prolong funding campaigns.
The Preferential Treatment Rule could affect emerging fund managers in two main ways: by potentially deterring other investors from committing to the fund and by making it challenging to secure anchor investors. Women and minority fund managers may struggle the most with access to capital, as data shows that women-owned and minority-owned firms face challenges in raising funds and attracting institutional investors.
While the goal of the new rules is to provide transparency and protect investors, the ramifications seem to disadvantage emerging fund managers, particularly women and minorities. The impact on diversity within the investment fund industry could have long-term effects on funding and support for diverse founders and minority startups.
