Feb. 10, 2022

Net Zero Asset Managers Initiative: How to Make the Commitment (Part Two of Two)

The Net Zero Asset Managers Initiative (Initiative) is an international group of asset managers committed to supporting the goal of net zero greenhouse gas emissions by 2050 or sooner, which is in line with the Paris Agreement and the current science on global warming and climate change, explained Lance C. Dial, Morgan Lewis partner and co‑author of a white paper on the Initiative. Since the Initiative was launched in December 2020, 220 asset managers with $57 trillion in assets under management have committed to the Initiative. This second article in a two-part series discusses applying the commitment to new funds versus existing funds, explains the role a firm’s CEO should play in the process, spells out the steps that managers should take to comply with the Initiative’s requirements and includes a checklist that managers can use to guide the process. The first article provided an overview of the Initiative, including who can participate in it, what asset managers should consider when deciding whether to commit to the Initiative and what that commitment requires managers to do. See our two-part series on the SBAI Responsible Investment Policy Framework: “Four Ways to Incorporate Into Investment Strategies” (Apr. 15, 2021); and “Three Key Considerations for Fund Managers” (Apr. 22, 2021); as well as our two-part series “Navigating the Evolving Legal and Regulatory ESG Investing Terrain”: Part One (Nov. 19, 2020); and Part Two (Dec. 10, 2020).

What Hedge Fund Managers Need to Know About Arbitration of Disputes

Increasingly, hedge fund managers are choosing to require disputes – whether involving members of a fund’s management firm complex or a fund’s investors – to be resolved through arbitration. Although an arbitration provision may be a relatively brief part of a hedge fund’s constituent documents, care should be taken to ensure it serves the interests of those who may use it. A well-thought-out, carefully crafted arbitration provision will provide the benefits a manager seeks without unpleasant surprises in terms of cost, process or outcome. In a guest article, Anne E. Beaumont, partner at Friedman Kaplan Seiler & Adelman, explains the basics of arbitration and explores key factors to be considered when deciding whether to designate arbitration as a mechanism for resolving disputes and crafting an arbitration provision. For additional insights from Beaumont, see “Making the Most of a Contractual Advice‑of‑Counsel Defense” (Mar. 11, 2021).

SEC Committee Statement Details Shortcomings in Form CRS Compliance

The SEC has been gradually ramping up its scrutiny of compliance with new Form CRS, which requires investment advisers and broker-dealers with retail clients to provide plain-English disclosures to those clients about the critical terms of the firm-client relationship. In 2021, it settled multiple enforcement actions concerning the form’s delivery and filing requirements. It has also been turning its attention to the substance of those filings. For example, the SEC’s Division of Examinations and FINRA have been examining registrants to assess their compliance with the formatting and substantive requirements of Form CRS. In addition, the SEC’s Standards of Conduct Implementation Committee (Committee) recently issued a statement on the implementation of Form CRS by SEC‑registered investment advisers and broker-dealers. The Committee found that many forms are deficient with respect to formatting and posting; meeting substantive disclosure requirements; or both. This article explores the Committee’s findings. See “SEC Resolves Enforcement Proceedings Over Late Filing and Delivery of Form CRS” (Sep. 16, 2021); as well as our two-part coverage of risk alerts on Regulation Best Interest and Form CRS: “What to Expect in Future Exams” (May 28, 2020); and “Key Takeaways for Broker-Dealers and Advisers” (Jun. 4, 2020).

ALFI Seminar Examines ESG and AML Developments in the E.U.

At a recent Digipulse USA seminar presented by the Association of the Luxembourg Fund Industry (ALFI), funds industry professionals examined significant trends and regulatory developments in the funds industry and their impact on U.S. managers. Marc‑André Bechet, deputy director general of ALFI, hosted the presentation. This article analyzes the portions of the seminar devoted to sustainable and environmental, social and governance investing, as well as anti-money laundering and counter-terrorist finance compliance in the E.U. A prior two-part series examined the portions of the ALFI seminar that covered the E.U. funds landscape and regulatory developments affecting distribution. The first article in that series highlighted the sections of the seminar that addressed the growth of the European funds industry, as well as fund distribution in the E.U. The second article addressed the new pre‑marketing regime under the cross-border distribution of funds directive; distribution in Switzerland and post-Brexit U.K.; and retail alternative investment products. For more from ALFI, see our two-part series “Navigating Changing E.U. Distribution, Marketing and AML Rules”: Part One (Jun. 11, 2020); and Part Two (Jun. 18, 2020).

Results of EY’s 2021 Global Alternative Investment Fund Survey of Managers and Investors (Part One of Two)

In the third quarter of 2021, EY conducted its 15th annual global alternative investment fund survey of 210 hedge fund and private equity fund managers, as well as 54 institutional investors, including funds of funds, pensions, endowments and foundations, representing approximately $1 trillion in assets under management. This two-part series discusses EY’s findings from the survey. This first article covers alternative investment fund performance; strategy and allocation preferences; evolving product offerings; special purpose acquisition companies; digital assets; outsourcing; and other evolving trends. The second article will review talent management and the evolving work environment; diversity, equity and inclusion; and responsible investing. See our two-part series “EY 2020 Survey Compares Perspectives of Institutional Investors and Private Fund Managers”: Part One (Dec. 10, 2020); and Part Two (Dec. 17, 2020).