Corbett: “Improving private credit regulations will unlock billions of dollars in capital to businesses of all sizes, and benefit investors in private credit funds”
Washington, D.C. — MFA supports the Dubai Financial Services Authority (DFSA) right sizing its regulation of private credits funds and recommends improvements to the DFSA private credit funds regulatory regime in a comment letter submitted today. The letter is in response to DFSA’s Private Credit Funds Call for Evidence.
In the letter, MFA encourages DFSA to harmonise its regulations with other global regulatory bodies to foster the growth of private credit funds in the region. Adjusting DFSA’s private credit regulations will support economic growth, activate capital investment, and enhance Dubai’s position as a global financial centre.
“The alternative asset management industry applauds DFSA’s effort to right size regulation of private credit. Improving private credit regulations will unlock billions of dollars in capital to businesses of all sizes, and benefit investors in private credit funds,” said Bryan Corbett, MFA President and CEO.
MFA’s letter recommends several updates to DFSA’s private credit funds regulation to attract more alternative asset managers. One recommendation is for DFSA to not approach private credit as a separate class of funds for the purpose of regulation:
MFA does not believe it is necessary to treat private credit funds as a separate class of funds. In the US, EU, and other developed markets, alternative investment funds are regulated based on the manner in which the fund is offered and sold, and the investors permitted to invest in the fund, rather than a particular strategy. Singling out private credit funds for additional layers of regulation is counterproductive to encouraging responsible, sustained growth of this asset class and, given the institutional nature of private credit investors, unnecessary. The private credit fund market is largely limited to professional clients that are capable of evaluating a fund’s use of leverage, its investment objectives, and liquidity terms.
MFA also recommends that the DFSA allow credit funds to diversify the credit products they invest in and provide multi-strategy funds the ability to invest in private credit:
Credit fund investors would benefit from being able to diversify by acquiring non-loan assets such as fixed income securities or other assets that would cause the fund to own a lower percentage of traditional credit assets. In addition, as the Call for Evidence notes, there is increasing popularity of so-called multi-strategy funds, where the fund may invest in several different strategies. These strategies often include a “sleeve” of private credit assets and MFA suggests that the future state of private credit fund regulation recognise and allow for multi-strategy funds to include a private credit sleeve, so long as it is marketed in a manner that is not misleading and accurately discloses its investment strategies.
Read the full comment letter here.
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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.
