SEC Postpones Mutual Fund Swing Pricing and Hard Close Proposals

Pushback Noticed

Baris says the industry pushback was so widespread that the SEC may have been “surprised by the intensity of the opposition.” While the proposals were not taken off the table, Baris notes it is telling that the SEC specifically said it was avoiding implementation in its 136-page final ruling.

“We also are not adopting proposed reporting amendments relating to funds’ use of swing pricing or to liquidity classifications in this release, as we are not adopting amendments to the underlying rules at this time,” the regulators wrote.

Baris said he would be “surprised” if the SEC moved ahead with the proposals again without some kind of public comment period.

In Wednesday’s voting, the SEC opted to amend the requirements for filings known as Form N-PORT and N-CEN, which will go into effect on November 17, 2025.

The Form N-PORT amendments require funds to report monthly within 30 days of the end of the month, as opposed to within 60 days of the end of each quarter. Form N-PORT also now requires funds’ monthly reports be made available to the public within 60 days of the end of each month, as opposed to on a quarterly basis.

This reporting will give the SEC more information on funds, particularly during times of market volatility, according to Douglas McCormack, a counsel in Sidley Austin’s investments funds group. That will add additional time and cost for fund managers.

A new report projects endowment assets will grow 7.9% over the next five years, compared with 4.7% and 4.2%, respectively, for public and corporate defined benefit plans.

Endowments are expected to have the highest asset growth rate among institutional investors annually over the next five years, thanks in part to a “strong appetite for actively managed strategies,” according to a recent report from Cerulli Associates.

Cerulli forecasts endowment assets will grow 7.9% over the next five years, compared with estimated annual growth of 4.7% for public defined benefit plans and 4.2% for corporate defined benefit plans during the same period.

“The growth in endowment assets can be intriguing for traditional managers looking to expand their institutional footprint,” said Chris Swansey, an associate director at Cerulli, in a statement. “However, managers will have to overcome several challenges to make headway, including increased demand for alternative investments and establishing relationships with hard-to-reach OCIO providers.”

According to the report, based on a survey conducted in the second quarter, “most of endowments’ rapid growth can be linked to their high allocations to alternative investments.” It also noted that 42% of endowments responded they prefer to invest in active strategies in public markets, compared with 23% who reported preferring public defined benefit plans. Along the same lines, 23% of endowments reported a preference for passive strategies in public markets, compared with 33% of defined benefit plans.

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The survey also found that 35% of endowments with more than $100 million in investable assets expect to increase their allocations to developed non-U.S. equities over the next 24 months, while 23% expect to increase their emerging markets equity allocations over the same period.

Meanwhile, most public defined benefit plan respondents indicated they expect to increase allocations to fixed-income asset classes, including investment-grade bonds and municipal bonds, as well as alternative assets, such as private equity, real estate and infrastructure.

“Many plans are looking to add duration to their portfolios in order to lock in long-term yields and exploit any price appreciation that will come with lower rates,” according to Cerulli’s report.

Outsourced CIO providers also strongly prefer active investing, according to the report, with 63% of those surveyed saying their assets are invested in actively managed strategies.

“This can create efficiencies for both asset managers that target large endowments via direct relationships and OCIO providers that manage smaller endowment assets, as they both seek similar products for their traditional asset allocations,” the report stated.

Despite expectations to outperform other institutional investors over the next five years, endowments remain the smallest institutional channel, according to Cerulli.

“While the growth of the assets is promising, the overall size of the channel limits opportunities for asset managers,” the report stated. “Despite this limited opportunity, asset managers still can effectively grow endowment asset market share by creating targeted distribution strategies and offering high-performing products in in-demand asset classes such as non-U.S. equities and investment-grade fixed income.”