LONDON (Reuters) - International regulators seeking to impose extra scrutiny on investment funds deemed systemically important because of their size risk hampering savings and harming the real economy, a top industry lobbyist said.
Speaking to Reuters ahead of a capital markets conference in Zurich, the chief executive of the Investment Company Institute (ICI), an international body that lobbies on behalf of invesment managers, said funds, however large, pose little systemic risk.
The Financial Stability Board (FSB), which acts as a regulatory arm of the G20 group of leading economies has proposed that funds with more than $100 billion (£58.94 billion) in assets are systemically important and could be subject to tighter controls. [ID:nL5N0MW3GU]
“I don’t see the systemic importance of these funds and yet if they are designated they will very quickly become non-competitive,” said Paul Schott Stevens.
Between 12 to 14 funds would be affected if a $100 billion size threshold is used, all of which are based in the United States. Among them are funds run by Vanguard, PIMCO, American Funds, SPDR S&P, Fidelity and JPMorgan (JPM.N). [ID:nL5N0MW3GU]
He also said that the relative resilience of funds during the financial turmoil of the 2008-2009 compared with banks, which suffered mass withdrawals and in some cases had to be bailed out by governments, showed they pose minimal systemic risk.
“If you look at who owns these funds ? Retail investors. How and why do they own them ? In retirement plans to a significant degree, to very long-term investing purposes,” he said.
During the 2008-2009 crisis the amount of money withdrawn from funds amounted to less than 5 percent of total assets, he added.
“If policymakers want to encourage a long-term approach to investment they need to act in a way as to encourage aggregators of capital,” he said.
“That then allows them to channel retail assets that are dedicated to long-term purposes to investments that not only will reward the individual who has made the investment but build the economy and build jobs in the process,” he added.
Editing by Greg Mahlich