Washington, D.C. — MFA issued the following statement in response to Banking Committee Chairman Sherrod Brown (D-OH) and Senator Jack Reed’s (D-RI) letter to the Federal Reserve regarding their concerns about private credit.
“Private credit funds contribute to a more resilient and efficient financial system by decreasing concentration risk, removing credit risk from the banking system, and enhancing credit availability to individuals and companies. In partnership with banks, through arrangements like significant risk transfers, private credit funds further safeguard the financial system from concentration and stability risks.”
“Private credit funds are different than banks, and deploy capital from sophisticated, institutional investors with long investment horizons and do not have a government backstop. If a fund fails, the losses are borne solely by that fund’s investors. Increased scrutiny of private credit is misplaced. The SEC already has a robust regulatory regime for the industry that grants regulators insight into the activities and health of funds. Additionally, private credit funds provide a wealth of data to Federal and state regulators that can also be used to monitor fund activity.”
“Efforts to curtail market-based financing will lead to less investment, less job creation, and fewer opportunities to insulate our financial system from risks.” — Bryan Corbett, MFA President and CEO
Officials from the Federal Reserve view private credit funds as “well positioned to hold the riskiest part of corporate lending.”
More information about the data private credit direct lending funds provide federal and state regulators is available in the MFA white paper, “Private credit data: Readily available and fit for purpose.”
More information about significant risk transfers (SRTs) is available in an MFA primer “Introduction to SRTs.”
To learn more about private credit and its benefits, click here.
About the global alternative asset management industry
The global alternative asset management industry, including hedge funds, credit funds, and crossover funds, has assets under management of $5.5 trillion (Q3 2023). The industry serves thousands of public and private pension funds, charitable endowments, foundations, sovereign governments, and other global institutional investors by providing portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets.
About MFA
Managed Funds Association (MFA), based in Washington, DC, New York, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 member fund managers, including traditional hedge funds, credit funds, and crossover funds, that collectively manage over $3.2 trillion across a diverse group of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors to diversify their investments, manage risk, and generate attractive returns over time.
