Asset Managers May Dodge ‘Systemically Important’ Label

US regulators have announced a closer review of “industry-wide products and activities” rather than individual managers in assessing systemic risk.

Asset management firms could avoid the “too big to fail” label, as US financial regulators announced they would focus their scrutiny on potentially risky products and activities rather than the individual firms.

The Financial Stability Oversight Council (FSOC)—established under the Dodd-Frank Act—said the shift in attention indicated asset managers were less likely to be labeled “systemically important.” Such designation would draw greater regulatory scrutiny by the US Federal Reserve.

“The council directed staff to undertake a more focused analysis of industry-wide products and activities to assess potential risks associated with the asset management industry,” the US Treasury Department said in a statement.

Prior to the change, the FSOC reviewed firms’ size, “interconnectedness,” leverage, off-balance sheet exposures, relationships with other financial institutions, and “any other factors the [council] deems appropriate” to make the “systemically important” designation.

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Asset management firms have since argued that the label would discourage specialization and lead institutional investors to pull assets to manage internally.

“I don’t see systemic risk in our asset managers,” Ken Griffin, CEO of Citadel, said in May. “I see systemic risk in the megabanks around the world.”

BlackRock also urged FSOC to better characterize the risk profile of the designation and focus on general industry practices that might pose threat to financial stability.

“We also believe that many risks are not specific to one investment fund or one asset manager, but rather result from common practices undertaken across all market participants,” the firm said.

Under the new direction, the FSOC said it “intends to monitor” the Securities and Exchange Commission’s reform of the money-market mutual fund sector that was passed last month.

It also announced it would maintain the “systemically important” labels for AIG and GE Capital, which were first designated July 2013 and will review Prudential’s designation in September.

Related Content: Are Asset Managers ‘Too Big to Fail’?

Harvard Management Company (HMC) has tapped Michael Ryan as head of public equity for the $32.7 billion endowment.

Ryan, who was most recently founder and CIO of New York-based investment management firm MDR Capital Management, will be leading strategy and performance of HMC’s global equities portfolio. Specifically, HMC said Ryan will be directing and developing internal investment activity and “continue to evolve HMC’s suite of external management relationships.”

He will report to Stephen Blyth, managing director and head of public markets, and will begin his new position in September.

“Mike brings deep experience across global equity markets, including expertise managing large, diverse investment teams and extensive knowledge of the global landscape and hedge fund strategies,” Blyth said in a statement.

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According to the endowment’s 2013 report, public equities returned 16.3% in the fiscal year ending June 30, 2013, well over the benchmark of 14.5%. The entire portfolio returned 11.3%, bumping its total assets to $32.7 billion.

“Public markets are an important driver of HMC’s returns and we are confident Mike will contribute significantly to our investment strategy and our ability to outperform our equity market benchmarks,” Blyth added.

Prior to his role at MDR Capital Management, Ryan was co-CEO of JAI Capital Management, a global long-short hedge fund. He also previously served as head of global securities at Credit Suisse and co-head of global equity products at Goldman Sachs Group.

Ryan received a Bachelor’s degree from Yale University.