MFA 2018 Year in Review

MANAGED FUNDS ASSOCIATION

Helping funds manage risk, reduce costs and attract assets.

Delivering Value 2018 YEAR IN REVIEW

You deliver for your investors.

MFA Delivers For You. MFA is the industry’s authoritative voice on policy and premier platform for peer-to-peer networking and operational, legal, and compliance training.

Collectively, MFA members manage more capital than any other hedge fund trade association in the world. Learn more at www.managedfunds.org.

MANAGED FUNDS ASSOCIATION

Copyright Š2018 by Managed Funds Association. All rights reserved. No part of this publication may be reproduced or transmitted in any form without the expressed written permission of the publisher.

Cover: Canary Wharf, London, UK.

Table of Contents MFA BOARD OF DIRECTORS. . . . . . . . . . . . . . . . . . . . . . 1 MESSAGE FROM THE PRESIDENT & CEO . . . . . . . . . 3 ON-THE-GROUND ADVOCACY . . . . . . . . . . . . . . . . . . . 4 MFA Policy Committees . . . . . . . . . . . . . . . . . . . . . . . . 6 By the Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 NETWORKING | COMPLIANCE, LEGAL, & OPERATIONAL TRAINING. . . . . . . . . . . . . . . . . . . . . . . . 24 Conferences. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26 Seminars and Forums. . . . . . . . . . . . . . . . . . . . . . . . .34 COMMUNICATION & EDUCATION . . . . . . . . . . . . . . .36 By the Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39 Media Mentions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40 HEDGEfundamentals . . . . . . . . . . . . . . . . . . . . . . . . .46 MFA STAFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48

MFA 2018 YEAR IN REVIEW | i

“Our industry plays an important and unique role in capital markets. We’re managers of risk, providers of liquidity and, importantly, partners with pension funds, endowments and others who rely on our expertise to help them meet their unique investment objectives. The untold story is that MFA helps us do it— advocating for us and our investors, telling our story, and making sure we have the tools to navigate expansive regulatory and compliance requirements.”

Michael Harris Chair, Managed Funds Association & President, Campbell & Company, LP

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MFA Leadership Board of Directors Michael Harris | MFA Chair; President, Campbell & Company, LP Jon Hitchon | MFA Vice-Chair; Managing Director, Chief Operating Officer, Two Sigma Investments, LP Joe Wiggins | MFA Secretary and Treasurer, Partner and U.S. Leader of PricewaterhouseCoopers Assurance Alternatives Practice, PricewaterhouseCoopers LLP David Angstreich | Chief Operating Officer and Chief Financial Officer, Valinor Management, L.P. Pamela Arnsten | Managing Director, J.P. Morgan Natalie Birrell | Partner & COO, Anchorage Capital Group, L.L.C. Darcy Bradbury | Managing Director, the D. E. Shaw group

Samuel Gallo | Chief Investment Officer, University System of Maryland Foundation Christopher Hayward | Managing Partner, Co-Head, J.P. Morgan Global Alternatives Joel Hinkhouse | Director, External Public Markets, Teacher Retirement System of Texas Natalie Deak Jaros | Partner, EY Frederic Leif | Managing Director and Chief Financial Officer, Abrams Capital Louis Molinari | Managing Director, Head of Capital Solutions, Barclays Jay Peller | Managing Director, Head of Fund Services, Citco Fund Services (USA) Inc. Adam Prestandrea | Principal and Chief Operating Officer, Element Capital Management LLC

Eric Burl | Head of Americas, Man Group

Andrew Rabinowitz | President and COO, Partner, Marathon Asset Management, L.P.

Whitney Chatterjee | Partner, Sullivan & Cromwell LLP

Marc Rothenberg | Managing Director, Goldman Sachs & Co.

Harshal Chaudhari | Managing Director and Chief Investment Officer, IBM Retirement Funds

Scott Schroeder | Co-Founding Partner, Balyasny Asset Management, L.P.

Jodi Lynn DeVito | Managing Director, Americas Head of Prime Services Coverage and Client Services, Credit Suisse

Zion Shohet | Chief Operating Officer, Elliott Management Corporation

Sally Dornaus | Managing Director and CFO, Bain Capital Credit and Bain Capital Public Equity

Kirk Wickman | Chief Operating Officer, Angelo, Gordon & Co. L.P. Ashley Wilson | Co-Global Head of Equities Trading and Head of EMEA Equities, Deutsche Bank

Counselor to the Treasury Secretary Craig S. Phillips addresses MFA’s Board, Washington, September 2018.

MFA 2018 YEAR IN REVIEW | 1

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MFA Leadership Message from the President & CEO TEN YEARS AGO,

new ones recognize the unique nature of

THE GLOBAL

investment firms. Our progress on several of

ECONOMY STOOD

these issues can be found in case studies that

AT THE PRECIPICE.

begin on page 8.

WELL-ESTABLISHED GLOBAL

Of course, the power of MFA’s network is a

INSTITUTIONS

reason why many of you are members. MFA’s

WERE SHAKEN

conferences, forums, and seminars this year

AND INVESTORS

provided multiple networking opportunities

SOUGHT SAFE

and operational, legal, and compliance training

HAVENS WHEREVER THEY COULD BE

that are best-in-class. I encourage each of

FOUND. SOME DAYS IT SEEMED LIKE THE

you to participate as often as you are able

BOTTOM WAS NOWHERE IN SIGHT.

– members have been able to prepare for many business and operational issues well in

The crisis dominated that year — my first —

advance as a result of information and insight

at MFA. It also set the stage for a sweeping

they received at MFA events.

revamp of our financial regulatory structure.

From the first meetings about the Dodd-

To those of you who are not MFA members,

Frank Act until now, MFA has been fighting

thank you for taking a moment to review our

for our industry’s interests, communicating its

recent work. We would be delighted to have

value, and making sure you have the tools to

you join our effort. With your support, MFA

thrive in this new regulatory construct. I am

will continue to be the authoritative voice our

tremendously proud of our decade of progress

industry expects and the premier platform

and achievement in delivering value across all

for education, training, and peer-to-peer

functional aspects of member firms.

networking that you deserve.

There is always more work to do. In 2018,

With kind regards,

MFA worked constructively with policymakers to keep intact those policies that work well, fine-tune those that do not, and make sure

Richard H. Baker

MFA 2018 YEAR IN REVIEW | 3

On-the-Ground MFA works constructively with lawmakers and regulators to keep intact policies that work well, fine-tune those that do not, and make sure new ones recognize the unique nature of investment firms. As a direct result of MFA advocacy in 2018, policymakers have taken meaningful action on key MFA priorities, including source code protection, the Internal Revenue Service (IRS) partnership audit regime, and issues related to Markets in Financial Instruments Directive II (MiFID II) implementation, among others.

[right] MFA President and CEO Richard H. Baker moderates a conversation with U.S. Representative Jeb Hensarling (R-TX), chairman of the House Financial Services Committee, at MFA Outlook (October 2018).

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Advocacy

MFA 2018 MFA YEAR 2018 YEAR IN REVIEW IN REVIEW |5 |5

Top MFA 2018 Policy Priorities IN EARLY 2018, MFA STAFF LED A ROBUST PROCESS TO DETERMINE THE ASSOCIATION’S ADVOCACY PRIORITIES. THE FOLLOWING LIST, WHILE NOT EXHAUSTIVE, IS BASED ON THE FEEDBACK AND RECOMMENDATIONS OF EACH OF MFA’S SUBSTANTIVE COMMITTEES. MFA STAFF IS ACTIVELY MONITORING ADDITIONAL SUBSTANTIVE ISSUES AND WILL CONTINUE TO ENGAGE POLICYMAKERS AS THE OPPORTUNITY OR NEED ARISES.

TAX

REGULATORY FRAMEWORK

• Seek Large Partnership Audit Technical Corrections • Seek Clarity on Implementation of Tax Legislation (e.g., Interest Deductibility, Carried Interest, SALT)

• Advocate for Activities-Based Systemic Risk Regulation and Against Potentially Misleading Measures of Leverage Being Developed by IOSCO • Improve the CFTC Swaps Trading Framework and Codify Existing Guidance and Relief • Address Bank Capital and Margin Regulations Affecting Customers’ Use of Derivatives (Supplementary Leverage Ratio) • Advocate for Practical, Narrowly Tailored, and Less Burdensome Position Limits Rules • Engage EU Policymakers to Ensure Properly Tailored Prudential Requirements for Investment Firms • Address Issues Related to MiFID II Implementation

INFORMATION & DATA SECURITY/ FINTECH • Seek Enhanced Protection of Confidential Registrant Information at the U.S. Regulatory Agencies and Similar Protections in the EU • Secure Passage of “The Protection of Source Code Act”

REGISTRATION & COMPLIANCE • Reduce Regulatory Burdens/Protect Confidential Information by Rationalizing Systemic Risk Reporting • Reduce the Complexity of the CFTC Swap Reporting Regime • Eliminate Duplicative Requirements by Rationalizing SEC and CFTC Registration • Prevent Harmful Changes to Short Sale Disclosure Rules • Ease Compliance Burden Under the EU Short Selling Regulation

MARKET ACCESS • Encourage Investor Engagement Through the Hart-Scott-Rodino Act Investment-Only Exemption • Protect Against Changes to EU Portfolio Delegation Rules • Ensure Continued Access to Clearing Under the EU’s EMIR Review

[left to right] U.S. Senator Ron Wyden (D-OR) addresses MFA members, September 2018; U.S. Representative Bill Huizenga (R-MI) at a meet and greet with MFA members, New York, June 2018; U.S. Representative Jim Himes (D-CT) addresses MFA members, September 2018.

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MFA Policy Committees ALL MFA MEMBERS ARE ENCOURAGED TO ACTIVELY PARTICIPATE IN THE ASSOCIATION’S POLICY COMMITTEES, WITH SEAT ALLOTMENT DETERMINED BY MEMBERSHIP LEVEL.

COMMUNICATIONS COMMITTEE Oversees communications and education initiatives and strategic media outreach on behalf of the industry.

2018 ADVOCACY

BY THE NUMBERS

21

2 2 2 2 1 1

Focuses on futures and commodities legislative and regulatory issues and CTA/CPO regulation.

DERIVATIVES & SWAPS COMMITTEE Focuses on legislative and regulatory issues impacting derivatives and swaps products, participants and markets.

Focuses on international issues and further development of MFA’s plan and strategy.

INVESTMENT ADVISER COMMITTEE Focuses on legislative and regulatory issues impacting the oversight and supervision of advisers to privately managed pools of capital.

TAX COMMITTEE Focuses on legislative and regulatory tax matters.

TRADING & MARKETS COMMITTEE Focuses on legislative and regulatory issues as they relate to trading and markets.

9 2

CTA, CPO & FUTURES COMMITTEE

INTERNATIONAL AFFAIRS COMMITTEE

MFA Letters Sent to U.S. Regulatory and Policymaking Bodies in 2018*

11

Securities and Exchange Commission Commodities Futures Trading Commission Federal Trade Commission Federal Reserve U.S. Department of the Treasury Internal Revenue Service Financial Stability Board Office of the Comptroller of the Currency

MFA Letters Sent to International Regulatory and Policymaking Bodies in 2018*

3 3 2 2 1

European Council European Commission International Organization of Securities Commissions Basel Committee on Banking Supervision French Financial Markets Authority

*Some letters were sent to multiple regulators.

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CASE STUDY

REGISTRATION & COMPLIANCE

Working to Prevent Harmful Changes to Short Sale Disclosure Rules ISSUE POLICYMAKERS BEGAN TO CONSIDER HARMFUL SHORT-SALE DISCLOSURE REQUIREMENTS IN SEVERAL PIECES OF LEGISLATION.

Written Statement of Richard H. Baker President & Chief Executive Officer Managed Funds Association

BACKGROUND & MFA ADVOCACY In early 2018, a coalition composed of the biochemical industry and the pharmaceutical industry, among others, lobbied Congress to pass short-sale disclosure requirements that would be contrary to MFA members’ interests.

Despite the coalition’s efforts, no such measure was introduced in the House. One such measure, the “Brokaw Act,” was considered in a June Senate Banking Committee hearing on corporate governance legislation. The legislation included language that would require “any person who, after acquiring a direct or indirect short interest in an equity security of a class described in paragraph (2), has a direct or indirect short interest representing more than 5% of the class, to report within four business days information

substantially similar to Schedule 13D.”

Before the Senate Committee on Banking, Housing, and Urban Affairs

Legislative Proposals to Examine Corporate Governance

As part of a broadbased advocacy campaign, MFA President and CEO Richard H. Baker submitted written testimony for the hearing which included MFA’s recently published white paper detailing the importance of short-selling. During the hearing, Committee Chairman Mike Crapo (R-ID) and Senator Pat Toomey (R-PA) also both highlighted important functions of short-selling in the marketplace.

JUNE 28, 2018

STATUS At present, no Member of the House of Representatives has introduced short selling disclosure legislation, although an organized industry lobbying effort continues to promote such a measure in both the House and Senate. MFA continues to convey member concerns around this issue to policymakers.

MFA white paper “An Introduction to Short Selling,” released June 2018.

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CASE STUDY

TAX

Seeking Clarity on Implementation of Tax Legislation ISSUE THROUGHOUT 2018, MFA ENGAGED WITH TREASURY AND THE IRS ON PROPOSED RULES AND GUIDANCE TO IMPLEMENT KEY PROVISIONS IN THE 2017 TAX CUTS AND JOBS ACT.

BACKGROUND & MFA ADVOCACY Following MFA’s extensive engagement during the discussions leading up to enactment of the Tax Cuts and Jobs Act in late 2017, MFA continued to engage with Treasury, the IRS, and policymakers on Capitol Hill to encourage implementation of the tax legislation in a manner consistent with the statutory intent. MFA members, working through the Tax Committee, identified several priority issues from the Tax Cuts and Jobs Act legislation, including implementing rules on interest deductibility, tax treatment of debt instruments, treatment of foreign partners, and carried interest, among others.

Treasury has issued guidance with respect to a number of the issues of importance to the industry and MFA continues to advocate for implementation of relevant provisions. As part of MFA’s advocacy efforts, members and staff met three times, including two in-person advocacy days to ensure key staff understood our industry’s priorities and concerns. MFA also submitted multiple written comments to Treasury regarding our priority issues on implementation. MFA also hosted a number of educational events for members to discuss key issues in the tax legislation and to provide updates on Treasury’s implementation of key issues.

STATUS While much of the implementation work has not yet been finalized, Treasury has proposed

initial guidance with respect to several of the priority issues that favorably addressed some of the industry’s policy concerns. Among other guidance provided by Treasury, it issued helpful guidance with respect to (1) withholding rules for partnerships with non-U.S. partners; (2) transition relief to taxpayers deemed to own a controlled foreign corporation as a result of the tax legislation and proposed guidance to provide partial relief to limit the broad application of attribution rules that could lead to fund investors being deemed to own a controlled foreign corporation; and (3) clarifying that legislative changes related to the timing of when income is taxable did not change longstanding recognition rules related to accrued market discount on debt instruments.

Eric Atkerson, Head of Tax, Citadel LLC; Sam Riesenberg, Principal, Washington National Tax, International Tax, KPMG; Monique Gallego, Partner, Sidley Austin LLC; and Kara Friedenberg, Partner, PwC, participate in an MFA seminar on implementation of the new tax framework, New York, February 2018.

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CASE STUDY

TAX

Seeking Large Partnership Audit Implementation and Technical Corrections ISSUE THE 2015 BIPARTISAN BUDGET ACT DIRECTED TREASURY AND THE IRS TO ESTABLISH A CENTRALIZED PARTNERSHIP AUDIT REGIME. MFA BELIEVED LEGISLATIVE AND REGULATORY FIXES WERE NEEDED TO ENSURE THE FRAMEWORK WAS WORKABLE FOR INDUSTRY AND CONSISTENT WITH CONGRESS’S INTENT.

BACKGROUND & MFA ADVOCACY Since the passage of the 2015 Bipartisan Budget Act, MFA has encouraged policymakers to implement the partnership audit legislation in a way that ensures:

• The reporting option in the statute is applied in a workable manner for tiered partnerships; • Partnerships and partners are permitted to make appropriate adjustment to avoid being subject to over-taxation; and, • Partners receive appropriate adjustments to their tax basis to avoid being subject to double taxation on the same income.

In addition to raising these points in letters to and conversations with key Treasury and IRS staff, MFA engaged key policymakers on Capitol Hill to advocate for technical corrections to the 2015 Bipartisan Budget Act’s large partnership audit language.

STATUS In a significant development, on March 23 the President signed into law the Consolidated Appropriations Act, which included the technical corrections MFA sought. Over the course of the year, Treasury and the IRS have continued to propose regulations to implement the partnership audit legislation. The proposals to date address many of the issues MFA has identified since the enactment of the legislation. MFA continues to advocate with Treasury and the IRS on finalizing the regulations and addressing remaining questions.

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CASE STUDY

MARKET ACCESS

Ensuring Private Fund Investors Have Access to Needed Information to Make Informed Decisions ISSUE THE SEC IS CONSIDERING ISSUING A NEW PROPOSED RULE TO AMEND RULE 206(4)-1 UNDER THE ADVISERS ACT, THE SO-CALLED “ADVERTISING RULE”. THE SEC ADOPTED THIS RULE WITH RETAIL INVESTORS IN MIND. THUS, THE CURRENT RULE WORKS IMPERFECTLY IN THE PRIVATE FUND CONTEXT AND IS OUT OF DATE FOR ALL INVESTORS GIVEN RECENT COMMUNICATION ADVANCEMENTS, SUCH AS THE GROWTH OF SOCIAL MEDIA. IN THE NEW RULE, THE SEC IS EXPECTED TO PROVIDE DIFFERENT REQUIREMENTS BASED ON THE TYPE OF INVESTOR WHO WILL RECEIVE THE ADVERTISEMENT (I.E., RETAIL INVESTOR VS. SOPHISTICATED INVESTOR).

BACKGROUND & MFA ADVOCACY MFA believes that the current advertising rule and the related no-action guidance frustrate the SEC’s investor protection goals by restricting the information that private fund advisers can provide to their potential and current investors. Given the sophistication of private fund investors, MFA believes that any new advertising rule proposal should allow private fund advisers to share all relevant, timely fund information with their current or potential investors that is not misleading and that those investors need to make investment decisions and manage their risk.

Throughout 2018, MFA staff engaged with SEC commissioners and staff from the SEC Division of Investment Management to ensure that they understood members’ concerns and to provide recommendations before the rule’s issuance on how the SEC should tailor the new rule for sophisticated investors and private fund advisers.

MFA recommendations included: • Codifying all guidance from SEC staff no-action letters related to the existing advertising rule;

• Incorporating a definition of “sophisticated investor” that includes accredited investors, qualified clients, qualified purchasers, qualified institutional buyers, knowledgeable employees, and non-U.S. investors that are eligible to invest in private funds; • Revising the definition of “advertisement” so that it includes materials that are unsolicited or widely distributed; and • Tiering requirements depending on the type of investor: (i) one tier that applies to all current and prospective investors (whether sophisticated or retail); (ii) one tier that applies only to sophisticated investors, and (iii) one tier that applies only to retail investors.

In addition, MFA drafted a supplementary document with recommendations for hypothetical performance information in response to SEC inquiries on that specific issue.

STATUS The SEC’s semi-annual regulatory agenda indicates that the SEC expects to issue the proposed rule no later than the end of the first quarter of 2019.

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CASE STUDY

REGISTRATION & COMPLIANCE

Rationalizing Form PF to Enhance Regulatory Efficiency and Reduce Burden ISSUE THE SEC AND COMMODITY FUTURES TRADING COMMISSION (CFTC) REQUIRE INVESTMENT ADVISERS AND COMMODITY POOL OPERATORS OF PRIVATE FUNDS TO PROVIDE LENGTHY, DETAILED REPORTS OF THEIR FUND POSITIONS, STRATEGIES, AND BUSINESS OPERATIONS THROUGH FORM PF AND FORM CPO-PQR—SIMILAR BUT DIFFERENT SYSTEMIC RISK FORMS. MFA BELIEVES THE FORMS SHOULD BE HARMONIZED AND CONSOLIDATED INTO A SHORTER, MORE ACCURATE, AND LESS BURDENSOME SYSTEMIC RISK REPORT.

BACKGROUND & MFA ADVOCACY The Dodd-Frank Act mandates that the SEC and the CFTC, in consultation with the Financial Stability Oversight Council (FSOC), work together to develop a systemic risk report for private funds.

The SEC and the CFTC, however, each requires its adviser or commodity pool operator (CPO) registrants to file separate SEC Form PF and CFTC Form CPO-PQR reports. MFA has consistently raised concerns with policymakers over the duplicative and burdensome nature of the reports.

In October of 2017, the Department of Treasury’s report to the President on Asset Management and Insurance recommended that “the SEC, the CFTC, SROs, and other regulators should work together to rationalize and harmonize the reporting regimes.”

In September and October of 2018, MFA filed similar letters with SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo, providing recommendations for a streamlined Form PF and requesting that the Commissions consolidate and simplify systemic risk reporting consistent with Administration policy.

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The letters recommend that the SEC, CFTC, and FSOC work together to revise Form PF to: • Reduce the reporting frequency and number of monthly data points; • Incorporate alphanumeric identifiers to mitigate potential cyber breaches; • Revise certain questions to better identify potential systemic risk; and • Simplify or eliminate certain questions that are duplicative or overly complex.

MFA submitted a marked-up version of Form PF with detailed comments and recommendations for the Commissions’ review to improve the accuracy and relevancy of the information that the SEC, CFTC, and FSOC review about the industry and individual managers and funds.

STATUS MFA members and staff continue to encourage policymakers on Capitol Hill, the Administration and the regulatory agencies to add revising Form PF to the SEC and CFTC regulatory agendas.

CASE STUDY

REGULATORY FRAMEWORK

Working to Ensure More Proportionate Capital and Remuneration Rules for Investment Firms in the EU ISSUE IN DECEMBER 2017, THE EUROPEAN COMMISSION PROPOSED NEW PRUDENTIAL REQUIREMENTS FOR INVESTMENT FIRMS (PRIF), DRAWING HEAVILY ON THE EUROPEAN BANKING AUTHORITY’S (EBA) RECOMMENDATIONS FOR NEW CAPITAL AND REMUNERATION RULES THAT WILL LIKELY IMPACT MFA MEMBERS WITH OFFICES IN THE EU. IF LEFT UNCHANGED, THE PROPOSAL WILL LEAD TO MORE BURDENSOME CAPITAL AND REMUNERATION RULES FOR MANY MFA MEMBERS OPERATING UNDER A MIFID LICENSE.

BACKGROUND & MFA ADVOCACY MFA is advocating for changes to the proposed regime aimed at: (i) ensuring that the rules on capital and remuneration are appropriately tailored to the business models and relevant risks of MiFIDlicensed sub-advisers; (ii) avoiding disproportionate capital requirements for asset managers; and (iii) ensuring that remuneration rules have appropriate measures for proportional application to reflect the non-systemic nature of fund managers. MFA has conducted meetings, sent letters and emails, provided drafting suggestions, and participated in speeches and panels in Brussels on the PRIF. MFA has held more than 35 targeted in-person meetings addressing the PRIF, engaging representatives of the European Commission, European Parliament, and EU Member States.

In these conversations MFA members and staff have encouraged policymakers to take their time in ensuring that the proposal truly addresses the unique nature of investment firms and is consistent

with the objectives of encouraging greater capital markets activity in the EU. MFA’s task is even more challenging in the context of Brexit, given that the U.K. has traditionally provided the greatest policy expertise on capital markets issues among EU member states.

STATUS Following the European Commission’s release, the Council of the EU and the European Parliament have been discussing their respective proposals for PRIF. MFA continues its discussions with key policymakers to advocate for changes aimed at ensuring that MiFID-licensed sub-advisers subject to the framework are not inappropriately scoped into the new burdensome rules on capital and remuneration, and policymakers are now considering adjustments to the rules on remuneration and scope of coverage.

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CASE STUDY

MARKET ACCESS

Promoting Fair Access to Markets and Market Information ISSUE OVER THE LAST TWO DECADES, REGULATORY AND TECHNOLOGICAL DEVELOPMENTS HAVE GREATLY RESHAPED EQUITIES MARKETS, REDUCING ANTICOMPETITIVE BARRIERS AND PROMOTING FAIR ACCESS TO MARKETS AND MARKET INFORMATION. WHILE THESE DEVELOPMENTS ULTIMATELY SERVE TO LOWER THE COST OF CAPITAL AND ENHANCE ECONOMIC GROWTH, THE EVERINCREASING COST OF MARKET DATA HAS THE POTENTIAL TO REVERSE THESE GAINS.

BACKGROUND & MFA ADVOCACY MFA members have expressed concern with the lack of transparency concerning exchange market data fees, licensing terms, and auditing practices.

Some members have also questioned if these exchange practices are meeting the equitable, fair, and reasonableness standards under the securities laws.

In August, MFA and the Alternative Investment Management Association (AIMA) petitioned the SEC to promulgate rulemaking to require exchanges to submit adequate financial information regarding market data operating costs and revenue in rule filings to justify fee schedule changes. The Associations requested that the SEC conduct more rigorous reviews of exchange and securities information processor plan participant rule filings to ensure that fees are reasonable, not unreasonably discriminatory, and that they do not impose an unnecessary and inappropriate burden on competition. The Associations also requested that the SEC conduct a study on ways to reform the U.S. equity market data regulatory

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framework with respect to proprietary market data, and the consolidated data processor model and its governance.

In Europe, MFA has engaged with European Securities and Markets Authority (ESMA) leadership to express concerns that data pricing practices appear to be inconsistent with the MiFID II

Isaac Chang, Managing Director, AQR Capital Management, represents MFA at an SEC roundtable on market data access and fees, Washington, October 2018.

requirement that real-time data be made available on a “reasonable commercial basis.” MFA has also coordinated with AIMA to raise awareness in Europe.

MFA has raised and continues to raise its concerns with respect to market data through in-person meetings with SEC Commissioners and the Division of Trading and Markets. In October, MFA attended the SEC Staff Roundtable on Market Data and Market Access. An MFA fund manager member participated in a Roundtable panel and raised the point that what the SEC considers as “core data”

should be much broader as institutional investors need more than consolidated, top-of-book data to determine best execution.

STATUS Following the SEC Staff Roundtable, MFA submitted a letter rebutting exchange arguments on the reasonableness of market data fees. MFA continues to work with stakeholders to encourage the SEC to require that exchanges provide greater transparency with respect to market data revenue and costs. MFA is also following up with ESMA in the EU.

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CASE STUDY

INFORMATION & DATASECURITY/FINTECH

Enhancing Protection of Confidential Information at Regulatory Agencies SECURING PASSAGE OF THE “PROTECTION OF SOURCE CODE ACT” ISSUE DUE TO BOTH STATUTORY MANDATES AND REGULATORY DISCRETION, FINANCIAL REGULATORS NOW ROUTINELY COLLECT SENSITIVE, OFTEN PROPRIETARY INFORMATION FROM REGISTRANTS. UNFORTUNATELY, POLICYMAKERS HAVE GENERALLY CONTINUED TO RELY ON A DATED FRAMEWORK FOR INFORMATION COLLECTION AND PROTECTION.

BACKGROUND & MFA ADVOCACY MFA supports efforts to provide regulators with the information they need to oversee financial markets effectively but has also raised strong concerns with the security of that information at the regulatory agencies.

In several in-person meetings and letters, MFA has urged the SEC and CFTC to narrow requests for information to what is pertinent to analyzing systemic risk or to achieving the agencies’ core missions; build protections, like alphanumeric identifiers, into the design of regulatory forms;

MFA Chair Mike Harris leads congressional staffers on a tour of Campbell & Company LP, Baltimore, May 2018.

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and protect data based on the level of confidentiality and sensitivity.

MFA has also raised this issue with relevant Members of Congress.

On February 14, the U.S. House of Representatives approved an omnibus package that included a key MFA legislative priority, the “Protection of Source Code Act.” The bipartisan bill would “prohibit the Securities and Exchange Commission (SEC) from compelling a person to produce or furnish algorithmic trading source code or similar intellectual property to the Commission unless the Commission first issues a subpoena.”

Internationally, MFA has met with G-7, Financial Stability Board (FSB), and International Organization of Securities Commissions (IOSCO) leadership and multiple European policy officials to urge regulators to modernize their methods of protecting proprietary data provided by investment firms and managers.

STATUS Both SEC Chairman Clayton and CFTC Chairman Giancarlo have stated that cybersecurity is one of their agencies’ top priorities. At meetings with regulators, MFA continues to inquire on internal progress of data protection policies and procedures. MFA continues to work with policymakers on Capitol Hill to encourage passage of the Protection of Source Code Act.

Screenshots from MFA’s educational video outlining recommendations to regulators on data and information security, released March 2018.

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CASE STUDY

INFORMATION & DATASECURITY/FINTECH

Fintech: The Role of Technology, Machine Learning, and Artificial Intelligence in the Investment Process MFA MEMBERS ARE LEADING EFFORTS TO USE MACHINE LEARNING AND ARTIFICIAL INTELLIGENCE (AI) TO OPTIMIZE MARKET EFFICIENCIES AND GROW INVESTOR RETURNS.

on the pace of innovation across a broad range of technologies and computing power, and no single technology will be transformative from one day to the next.

THOSE EFFORTS ARE STILL IN THE EARLY STAGES; WHILE AI’S ROLE IN THE INVESTMENT PROCESS IS EXPANDING, AT PRESENT AI COULD STILL BE DESCRIBED AS “SMART AUTOMATION” RATHER THAN A PROXY FOR HUMAN INTELLIGENCE.

Machine learning and AI allow investment professionals to make better use of data, improve reporting processes, and refine algorithms that guide investment strategies. MFA members also use technology to establish robust compliance and testing programs to ensure that their algorithms, trading systems, and other areas of the fund perform as intended. The application of AI and machine learning to improve investing is part of an evolution, not a revolution. Progress depends

In investment, the key is finding jurisdictions and markets that encourage innovation while protecting the value of intellectual property, algorithms, source code, and proprietary data—the lifeblood of many alternative asset managers.

MFA HAS CALLED ON POLICYMAKERS TO ENACT ROBUST REGULATORY FRAMEWORKS TO ENSURE THAT MARKET PARTICIPANTS AND REGULATORS ADHERE TO STRONG STANDARDS OF GOVERNANCE, DATA PROTECTION, AND NETWORK SECURITY.

MFA believes that regulations should allow for a broad platform of innovation and not encourage one set of technology over another. Regulations should

MFA members Darcy Bradbury of the D.E. Shaw group, Nadine Le Gall of Man Group, and Stephen Berger of Citadel LLC participate in a roundtable discussion with Members of the European Parliament in New York. July 18, 2018.

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be adaptable enough to enable innovation and provide FinTech entrepreneurs with assurances that they will face a level playing field that includes fair and equal access accompanied by strong legal and regulatory frameworks. Adaptability in technology and finance regulation can be achieved through regular policy reviews. MFA supports the European Union’s regulatory review process that requires legislators and policy officials to revisit regulations and directives to ensure that they remain relevant and effective. In the United States, comment and notice exercises are helpful to allow regulatory agencies to seek stakeholder feedback on whether rules need further interpretation or change.

Some of the fastest growing areas of FinTech are Distributed Ledger Technology (DLT), cloud services, and smart contracts. While much public focus has been on how DLT is being used to develop cryptocurrencies and other types of assets, these technologies have vast potential to improve the accuracy and efficiency of processes, records, and reports. Given this potential, MFA believes the markets need appropriate regulatory frameworks for these technologies. MFA has advocated for regulators to take a principlesbased approach, enabling robust but flexible oversight of technological change, the variety of FinTech solutions in development, and the range of active market participants.

At the international level, MFA cautions that differing regulatory standards across jurisdictions could lead to unwelcome regulatory arbitrage.

SPOTLIGHT

EU LAWMAKERS IN NEW YORK On July 18, 2018, MFA welcomed Members of the European Parliament for a roundtable discussion in New York focused on the evolution of technology in finance. During the discussion, MFA and its members shared with European lawmakers the work MFA is developing on the role of technology, the regulatory framework, and advancements in FinTech — with a focus on the benefits to investors and markets.

Jim Rowen, COO, Renaissance Technologies LLC participates in a roundtable discussion with Members of the European Parliament, New York, July.

Richard H. Baker, MFA President and CEO, and Jon Hitchon, MFA Vice Chair and Managing Director and COO of Two Sigma Investments LP participate in a roundtable discussion with Members of the European Parliament, New York, July.

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CASE STUDY

MARKET ACCESS

Encouraging Investor Engagement Through Hart-Scott-Rodino Act Reforms ISSUE IN RECENT ENFORCEMENT CASES AGAINST HEDGE FUND INVESTORS, THE DEPARTMENT OF JUSTICE (DOJ) AND THE FEDERAL TRADE COMMISSION (FTC) HAVE ADOPTED A NARROW VIEW OF THE APPROPRIATE USE OF THE “INVESTMENT-ONLY” EXEMPTION TO THE HART-SCOTT-RODINO ACT’S (HSR ACT) PREMERGER NOTIFICATION FILING AND WAITING PERIOD REQUIREMENTS. THIS NARROW INTERPRETATION CHILLS ORDINARY-COURSE ENGAGEMENT BETWEEN INVESTORS AND COMPANY BOARDS AND MANAGEMENT, CREATING POLICY TENSIONS WITH THE FEDERAL SECURITIES LAWS’ POLICY OF ENCOURAGING INVESTORS TO ENGAGE WITH ISSUERS. MFA MEMBERS ARE NO LONGER CERTAIN THEY CAN RELY ON THE HSR ACT’S INVESTMENT-ONLY EXEMPTION AS THEY HAVE IN THE PAST.

BACKGROUND & MFA ADVOCACY In 2018 MFA continued to advocate for the adoption of a new de minimis exemption and clarification of the meaning of “investment-only” as regulatory solutions. In June MFA and the Council of Institutional Investors (CII) outlined this solution in two letters to the new FTC chairman and in meetings with two of the new FTC commissioners.

STATUS MFA is devoting resources to recalibrate its advocacy work to address the political aspects of achieving HSR Act reforms. Such reforms remain a priority for MFA, as they would relieve the undue regulatory burden and unnecessary costs on institutional investors resulting from the FTC’s increasingly narrow interpretation and application of the investment-only exemption under the HSR Act.

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CASE STUDY

REGULATORY FRAMEWORK

Addressing Bank Capital and Margin Regulations Affecting Customers’ Use of Derivatives (SUPPLEMENTARY LEVERAGE RATIO AND UNCLEARED INITIAL MARGIN REQUIREMENTS)

ISSUE IN ITS CURRENT FORM, THE U.S. SUPPLEMENTARY LEVERAGE RATIO RULE (SLR) DOES NOT CONSIDER INITIAL MARGIN (IM) THAT MFA MEMBERS POST WITH THEIR RESPECTIVE CLEARING FIRMS AS A RISK MITIGANT. THIS POLICY UNDERMINES DERIVATIVES CLEARING. IN ADDITION, NEW IM REQUIREMENTS FOR UNCLEARED DERIVATIVES COULD INCREASE THE COST OF TRADING, REDUCING LIQUIDITY AND HEDGING ACTIVITY IN THESE MARKETS.

BACKGROUND & MFA ADVOCACY Throughout 2018, MFA continued to advocate for improvements to bank capital and margin requirements to reduce the risk of adverse effects on the use of derivatives by buy-side market participants.

MFA has repeatedly urged policymakers to adopt a deduction from the leverage exposure denominator in the U.S. supplementary leverage ratio (SLR) for customer initial margin for centrally cleared derivatives.

MFA submitted several letters to regulators, including a joint comment letter with the Asset Management Group of the Securities Industry and Financial Markets Association (SIFMA AMG) in response to a proposal by the Federal Reserve to recalibrate the enhanced SLR. On February 14, MFA President and CEO Richard H. Baker submitted written testimony before the House Financial Services Committee’s Subcommittee on Capital Markets, Securities and Investments in support of bipartisan legislation to require the appropriate Federal banking agencies to recognize the exposure-reducing nature of client

margin for cleared derivatives. The legislation was subsequently approved by the House Financial Services Committee by a vote of 44 to 16.

In October, MFA submitted a letter to the BCBSIOSCO Working Group on Margining Requirements (WGMR) on IM requirements for uncleared derivatives. The letter provided constructive and targeted recommendations to facilitate the smooth and efficient implementation of the new IM requirements for uncleared derivatives in advance of Phases 4 (September 1, 2019) and 5 (September 2, 2020), which would scope-in many additional firms. MFA member firms participated in WGMR’s industry roundtable on these issues in London to discuss MFA’s recommendations.

STATUS MFA has already achieved favorable advocacy outcomes. On July 2, the Fed decided not to adopt its proposal to require global systemically important banks (G-SIBs) to report all cleared derivatives in their risk-based capital surcharge scores. The Fed’s decision grants the joint request of MFA and SIFMA AMG, which will avoid further adverse effects on the buy-side’s ability to access affordable client clearing services.

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CASE STUDY

MARKET ACCESS

Protecting Against Changes to EUs Portfolio Delegation Rules ISSUE THROUGH PORTFOLIO DELEGATION ARRANGEMENTS, UNDERTAKINGS FOR COLLECTIVE INVESTMENT IN TRANSFERABLE SECURITIES (UCITS) AND ALTERNATIVE INVESTMENT FUNDS (AIFS) IN EUROPE ARE ABLE TO ACCESS GLOBAL CAPITAL MARKETS AND TAP INTO THE STRATEGIES OF THE MOST SUCCESSFUL INVESTMENT MANAGERS IN THE UNITED STATES AND AROUND THE WORLD. THE EUROPEAN COMMISSION (EC) PROPOSAL UNDER THE EUROPEAN SUPERVISORY AUTHORITIES (ESA) REVIEW WOULD JEOPARDIZE THIS LONG-STANDING PRACTICE

BY GRANTING ESMA NEW POWERS TO CHALLENGE THE REGULATORY DECISIONS OF NATIONAL EUROPEAN REGULATORS, WHO HAVE LONG TRACK RECORDS OF EFFECTIVELY SUPERVISING AND ENFORCING PORTFOLIO DELEGATION IN THEIR COUNTRIES.

BACKGROUND & MFA ADVOCACY MFA believes the longstanding model of financial portfolio delegation and outsourcing arrangements has served EU pension funds and investors well for decades.

While we recognize EU regulators’ concerns about so-called “letterbox entities”, MFA communicated to European policymakers that creating two levels of regulator review of delegation and outsourcing arrangements would limit investor choice, introduce excessive and disproportionate business uncertainties, and act as a barrier to entry for many non-EU managers.

European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici and MFA President and CEO Richard H. Baker at the European Financial Services Conference, Brussels, February 2018.

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In letters, panels, speeches, and in-person conversations with policymakers from the European Commission and European Parliament, and from member states such as the U.K., France, Germany, and Austria, MFA outlined the disruption

such a change would entail and argued that day-to-day delegation oversight and enforcement in Europe should remain with national regulators who understand their markets best.

STATUS Key EU member states and other trade

associations who are aligned with MFA called for Brussels to come up with a less disruptive approach that avoids two levels of review of delegation to non-EU managers.

Consistent with that, recent drafts of the ESA review propose that ESMA play a supervisory convergence role.

SPOTLIGHT: BREXIT BREXIT INFLUENCED NEARLY EVERY FINANCIAL POLICY DECISION IN EUROPE IN 2018. MFA IS WORKING CONSTRUCTIVELY WITH ALL SIDES TO ENSURE THAT OUR MEMBERS CONTINUE TO HAVE ACCESS TO BOTH EUROPEAN AND UK MARKETS. IN TALKING WITH POLICYMAKERS, MFA EMPHASIZES THE IMPORTANCE OF ESTABLISHING A LEVEL PLAYING FIELD POST-BREXIT TO ALLOW MANAGERS TO CONTINUE TO HAVE ACCESS TO BOTH EU AND UK MARKETS AND INVESTORS.

MFA 2018 YEAR IN REVIEW | 23

Networking and Compliance, Legal, & Operational Training MFA is a powerful source of expertise and advice for fund professionals. Many member firms even save valuable time and dollars as a result of information they learn at MFA seminars and forums held throughout the year. Even more members meet potential investors and receive the latest compliance training at one of MFA’s six major conferences – including the inaugural MFA West Conference in Santa Barbara.

[right] MFA members hear about the latest regulatory trends at MFA’s Legal and Compliance 2018 Conference.

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MFA 2018 MFA YEAR 2018 YEAR IN REVIEW IN REVIEW | 25 | 25

Events CONFERENCES WITH THE GUIDANCE OF OUR CONFERENCE ADVISORY BOARDS, MFA CONTINUED TO EXPAND ALLOCATOR INVOLVEMENT AND PARTICIPATION IN ALL SIX MAJOR CONFERENCES.

MFA NETWORK MFA expanded the content offering at MFA Network 2018 to include fixed income and credit-focused programming as well as discussions around cryptocurrency, technology and data efficiencies, master custody accounts, and various investor fireside chats. The conference had more than 750 delegates in attendance and approximately 350 members also took advantage of MFA Manager Suites to conduct one-on-one meetings with potential allocators.

Stephen Blundin, Director, Liquid Alternatives, Verizon Investment Management Corp.; Jeanmarie Grisi, Chief Investment Officer, Nokia; and, Phillip Moran, Senior Investment Analyst, United Parcel Service of America participate in a panel discussion on trends in corporate portfolio construction.

MFA Network 2018 Conference lunch session with 750+ attendees.

26 | MFA 2018 YEAR IN REVIEW

Approximately 350 members took advantage of MFA Manager Suites to conduct one-on-one meetings with potential allocators at Network.

MFA LEGAL AND COMPLIANCE MFA Legal and Compliance 2018 attracted more than 400 delegates representing leading domestic and international regulators, former regulators, policy experts, outside and in-house general counsels, and chief compliance officers. Commodity Futures Trading Commission (CFTC) Chairman Christopher Giancarlo addressed members at this year’s conference and weighed in on a number of key MFA policy priorities.

Roundtable sessions covered issues ranging from social media best practices, fund structuring challenges, and enforcement trends to Markets in Financial Instruments Directive II (MiFID II) implementation.

Conference attendees participate in roundtable discussions.

Due to the weather, CFTC Chairman J. Christopher Giancarlo addresses attendees via telephone.

Whitney A. Chatterjee, Partner, Sullivan & Cromwell LLP; Shawn Fagan, Chief Legal Officer and Managing Director, Citadel LLC; Tracy Richelle High, Partner, Sullivan & Cromwell LLP; and Daniel R. Margolis, General Counsel, Ellington Management Group, participate in a panel discussion on ethics.

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MFA WEST MFA’s inaugural due diligence, operations, and compliance event took place May 7-9 in Santa Barbara.

More than 150 directors of ODD, COOs, CCOs, GCs, and CFOs from the most influential asset allocators and managers gathered for three days of interactive content and networking. The topics covered included regulators’ latest initiatives, investor/manager transparency, adoption of automation and big data technologies, and new cost models.

Joon Kim, Partner, Cleary Gottlieb Steen & Hamilton LLP; Vincent McGonagle, Principal Deputy Director, Division of Enforcement, U.S. Commodity Futures Trading Commission; Jose F. Sanchez, Partner, Sidley Austin LLP; Mark Schein, Managing Director and Chief Compliance Officer, York Capital Management, LLC; Kristin A. Snyder , Co-National Associate Director of the Investment Adviser/Investment Company, Securities and Exchange Commission’s Office of Compliance Inspections and Examinations; Michael C. Sohn, Supervisory Special Agent, FBI Los Angeles Cyber Division; and, Jennifer Sunu, Director, Compliance, National Futures Association, participate in a panel discussion examining the regulatory landscape.

Attendees at MFA’s inaugural West Conference, Santa Barbara, California.

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Attendees network following a day of programming at MFA West.

MFA FORUM The 24th annual Chicago business development and educational conference featured a dynamic program based on input from MFA’s Institutional Investor Advisory Board as well as MFA manager members.

Approximately 400 fund managers, allocators, and industry stakeholders discussed topics ranging from alternative risk premia to systematic and discretionary global macro.

Attendees at MFA’s Forum 2018 conference, Chicago.

Top right: Attendees register for MFA Forum 2018.

Middle right: Marlin Naidoo, Global Head of Capital Introduction and Consulting, Deutsche Bank; Moses Maxfield, CFA, CAIA, Investment Officer, Virginia Retirement System; Ed Shim, then-Investment Officer, Diversified Strategies, Teachers’ Retirement System of the State of Illinois; and Steven Wilson, Senior Portfolio Manager, Teacher Retirement System of Texas, participate in a panel discussion on alternative risk premia.

Bottom right: Dominic Garcia, Chief Investment Officer, New Mexico Public Employees Retirement Association; Jeremy Heer, Senior Portfolio Manager, Strategy, The University of Chicago; Neil Messing, Head of Hedge Funds, Office of New York City Comptroller; and Michael Nicks, Director of Investments, Pepperdine University, participate in a panel discussion on portfolio construction and risk management.

MFA 2018 YEAR IN REVIEW | 29

MFA OUTLOOK The 10th annual Outlook Conference featured a terrific program of the industry’s top investors and allocators focused on the year ahead. This year’s iteration of the industry’s premiere hedge fund thought leadership conference covered topics ranging from the application of new political risk frameworks to traditional investment principles and the role of AI. It also featured an armchair chat between MFA President and CEO Richard Baker and Congressman Jeb Hensarling (R-TX), chairman of the House Committee on Financial Services, and a keynote with Christopher Krebs, under secretary, National Protection and Programs Directorate (NPPD), Department of Homeland Security (DHS).

Ulrike Hoffmann-Burchardi, Managing Director, Senior Portfolio Manager, Tudor Investment Corporation; Sara E. Nainzadeh, Chief Investment Officer, Centenus Global Management, LP; and, James Pieri, Portfolio Manager, Head of Private Healthcare, Blue Mountain Capital LLC participate in a panel discussion on opportunities in the technology, energy, and healthcare sectors.

Attendees listen to a panel discussion at MFA’s Outlook 2018 Conference.

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SPOTLIGHT: GOVERNMENT RELATIONS FORUM

MFA MIDTERM ANALYSIS EVENT TWO DAYS AFTER THE MIDTERM ELECTIONS MFA HELD A SEMINAR TITLED “MFA’S MIDTERM ELECTION ASSESSMENT: A FIRST LOOK AT THE 2018 RESULTS AND WHAT THEY MEAN FOR THE ASSET MANAGEMENT INDUSTRY.”

MFA Founders Council member Balyasny Asset Management LLP hosted the event and its Head of Tax, Kevin Roulston, delivered opening remarks.

MFA co-heads of Government Relations Lou Costantino and David Landers moderated a panel discussion featuring Kirk Blalock, Partner, Fierce Government Relations; Rick Dearborn,

Partner, The Cypress Group; Francis Grab, Principal, Washington Council Ernst & Young; and, Jimmy Ryan, Founder, Subject Matter.

Panelists discussed potential action in the first 100 days of the incoming Congress, who will fill key leadership posts and what policies they will focus on, and expectations for the lame duck session.

David Landers, Executive Vice President and Managing Director, Government Relations, MFA; Kirk Blalock, Partner, Fierce Government Relations; Jimmy Ryan, Founder, Subject Matter; Rick Dearborn, Partner, The Cypress Group; Francis Grab, Principal, Washington Council Ernst & Young; and, Lou Costantino, Executive Vice President and Managing Director, Government Relations, MFA, participate in a panel discussion at MFA’s midterm elections assessment event.

Kevin Roulston, Head of Tax, Balyasny Asset Management L.P. delivers opening remarks. Balyasny hosted the event.

Sarah Morgan, Vice President, Government Relations, PAC and Political Engagement, welcomes attendees.

MFA 2018 YEAR IN REVIEW | 31

GLOBAL SUMMIT MFA’s Global Summit conference in London provided guidance and information on global investing, as well as operational and compliance issues, with input from U.S., U.K., and EU-27 policymakers and leading industry experts. Speakers included European Securities and Markets Authority Chair Steven Maijoor, U.K. MP and Economic Secretary to the Treasury John Glen, and representatives from the U.K. Financial Conduct Authority, the European Banking Authority, the Federal Ministry of Finance (Germany), the Autorité des Marchés Financiers (AMF) and the U.S. CFTC.

Attendees participate in a breakout session on marketing and capital raising rules and best practices in Europe.

Steven Maijoor, Chair, European Securities and Markets Authority (ESMA), delivers keynote remarks on ESMA’s 2019 policy priorities.

“The sheer economic weight of our financial services sector is one of the strongest things in our favor. It means we will not retreat to a place of isolation nor blindly run a regulatory race to the bottom,” [Economic Secretary to the Treasury and City Minister John Glen MP told a Managed Funds Association conference. “We have confidence the issue will be resolved and resolved soon.”

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Fabrice Montagné, Chief UK and Senior European Economist, Barclays; Natasha Cazenave, Managing Director, Head of the Policy and International Affairs Directorate, The Autorité des Marchés Financiers; Lee Foulger, Head of International Department, Financial Conduct Authority; Eric Pan, Director, Office of International Affairs, U.S. Commodity Futures Trading Commission; and, Esther Wandel, Head of Investment Funds Division, Bundesministerium der Finanzen, participate in a panel discussion on policy challenges facing capital markets in the Brexit era.

Jon Hitchon, MFA Vice-Chair and Managing Director and COO, Two Sigma Investments LP; Rodolphe Blavy, Deputy Director of the European Offices of the International Monetary Fund; Matt King, Managing Director and Global Head of Credit Strategy, Citi; and, Elina Ribakova, Visiting Fellow, Bruegel participate in a panel discussion on the global economic outlook.

MFA 2018 YEAR IN REVIEW | 33

Seminars MFA HOSTED 14 TIMELY, TOPICAL SEMINARS ON KEY EMERGING ISSUES IN 2018. THIS YEAR, SEMINAR TOPICS INCLUDED:

• Examining the New Tax Framework • The Practitioner’s Guide to General Data Protection Regulation Compliance • Update on SEC Adviser Exams: A Conversation with Jane E. Jarcho, SEC • The Outlook for ESG Investing • Responding to Changes in the Tax Framework • Application of the New AML Regulations in the Cayman Islands

• Access to Markets and Market Data • Exploring Fund Structures, Management, and Distribution Platforms for U.S. Funds in Europe • The Evolution of Private Credit Fund Structures and Outlook for Private Credit • Managing Your Digital Reputation: Are You Taking the Right Steps • SEC Compliance Exams: Are You Prepared?

• MFA’s Midterm Election Assessment: A First Look at the 2018 Results and What They Mean for the Asset Management Industry • Examining the Proposed Tax Framework Regulations

MFA seminar on SEC examinations with then-SEC Deputy Director of the Office of Compliance Inspections and Examinations Jane Jarcho, New York, April 2018.

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Operational Leadership Forums MFA FORUMS DELIVER VALUE ACROSS ALL OPERATIONAL AREAS OF A MEMBER FIRM. These small members-only working groups meet regularly to promote best practices and professional development through peer-to-peer education. MFA Forum meetings allow members to take a deep dive on regulatory, operational, or business issues that might not be front-page news, but have a real impact on MFA’s member firms and the industry at large.

In 2018, members exchanged best practices and heard from special guests at forums covering topics such as General Data Protection Regulation (GDPR) and MiFID II implementation; cryptocurrencies and alternative data; and state and federal tax issues and non-cleared margin rules among others. MFA Leadership Forums comprise: • • • • • • • • • • • • •

Chief Compliance Officer Forum Chief Financial Officer Forum Chief Operating Officer Forum Chief Risk Officer Forum Chief Technology Officer and Chief Information Officer Forum CTA/CPO Forum General Counsel Forum Government Relations Forum Human Capital Forum Investor Relations and Business Development Forum OTC Derivatives Forum Outside Counsel Forum Tax Forum

MFA 2018 YEAR IN REVIEW | 35

Communication With outreach to stakeholders through traditional educational tactics as well as more innovative digital strategies, MFA works to advance member policy priorities and highlights the work our members do to provide retirement for workers, capital for businesses, and increased resources for endowments and foundations.

Politico’s Morning Money FEBRUARY 20, 2018

[right] MFA Board Member Chris Hayward, Highbridge Capital Management LLC, is seen taping an educational video that highlights the importance of information and data security at the regulatory agencies.

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The Managed Funds Association has a new video up on Tuesday “outlining ... concerns and some policy recommendations regarding cybersecurity at regulatory agencies.”

& Education

MFA 2018 MFA YEAR 2018 YEAR IN REVIEW IN REVIEW | 37 | 37

Communication WHETHER BY PRODUCING A VIDEO DETAILING OUR RECOMMENDATIONS TO REGULATORS ON DATA SECURITY OR A WHITE PAPER OUTLINING THE BENEFITS OF SHORT SELLING, MFA’S COMMUNICATIONS EFFORTS PLAYED A CRITICAL ROLE IN THE ASSOCIATION’S 2018 ADVOCACY EFFORTS.

MFA engages reporters covering our industry in a strategic fashion, highlighting member concerns around issues such as market data licensing terms and fees and data security and correcting misimpressions before or after they make their way into print.

We continued to expand our reach through thought leadership offerings that bring together key stakeholders to discuss issues of importance to the membership. MFA staff and members can often be found at industry events, further cementing MFA’s role as a thought leader.

Finally, whether it is through daily clips, weekly and monthly policy updates, or a mid-year mailing giving members information about completed and upcoming Association activities, the Communications Team continued to find any and every opportunity to keep members up to date.

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2018 COMMUNICATION

BY THE NUMBERS MORE THAN

MORE THAN

100,000

330,000

MFA Website Visitors

Unique Pageviews

162,108

MORE THAN

4,300

Total Twitter Impressions

Twitter Followers

8,500

NEW VISITORS TO

HEDGEfundamentals.org MFA’s suite of education videos were viewed more than 6,300 times in 2018.

MFA 2018 YEAR IN REVIEW | 39 MFA 2018 YEAR IN REVIEW | 39

Select Media Mentions

MFA President and CEO Richard H. Baker outlines MFA’s European policy priorities in open press remarks at the European Financial Services Conference, Brussels, February 2018.

U.S. Raises Pressure Over EU Plan for Changes to Fund Rules

by Owen Walker FEBRUARY 4, 2018

Richard Baker, chief executive of the Managed Funds Association, which represents US alternative investors, visited Brussels and London last week to speak to policymakers and regulators.

“Our members are concerned that any significant changes to the ability of EU investment managers to outsource or delegate the management of certain funds could harm the very investors who rely on the alternative asset management and Ucits [EU mutual funds] industries,” he told a conference.”

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Hedge Fund Trade Groups Ask SEC to Review Market Data Fees AUGUST 27, 2018

The Managed Funds Association and the Alternative Investment Management Association have asked the Securities and Exchange Commission to initiate regulatory actions, issue guidance and conduct a study on data fees charged by some exchanges.

Trade Body MFA Sets Out MiFID II and EU Regulation Concerns

Council Said to Back Capital Relief for Certain Investment Firms

by Bjarke Smith-Meyer SEPTEMBER 5, 2018

Investment firms will welcome the four countries’ successful efforts. The industry has ramped up its lobbying to soften the draft rules. Speaking at a QED event on IFR on Tuesday, Michael Pedroni, executive vice president and managing director of international affairs at the Managed Funds Association, said the proposals were still “too bank-like.”

MFA 2018 YEAR IN REVIEW | 41

THOUGHT LEADERSHIP

Global Finance Forum ON APRIL 19, MFA CO-HOSTED THE SECOND ANNUAL GLOBAL FINANCE FORUM, ENTITLED “CAPITAL MARKETS, GROWTH AND THE ECONOMY OF TOMORROW.” The forum, which coincided with the IMF-World Bank meetings in Washington, began with keynote remarks from Federal Reserve Governor Lael Brainard. Following the governor’s remarks were two question and answer sessions: one between MFA President and CEO Richard H. Baker and European Commission Vice President for the Euro and Social Dialogue Valdis Dombrovskis, and the second between FIA President and CEO Walt Lukken and Mark Calabria, chief economist to Vice President Mike Pence. The event concluded with Sir Jon Cunliffe, deputy governor of the Bank of England, delivering remarks and participating in a question and answer session with Securities Industry and Financial Markets Association (SIFMA) President and CEO Ken Bentsen.

During their conversation, Mr. Baker and Vice President Dombrovskis discussed key MFA policy priorities, including the European Commission’s Capital Markets Union initiative, industry concerns on portfolio delegation, data security, sustainable finance, and Brexit.

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Sir Jon Cunliffe, Deputy Governor of the Bank of England, participates in a question and answer session.

Chief Economist to the Vice President Mark Calabria and FIA President and CEO Walt Lukken conduct an armchair chat.

Federal Reserve Governor Lael Brainard delivers keynote remarks.

MFA 2018 YEAR IN REVIEW | 43

THOUGHT LEADERSHIP

Women’s Leadership Forum IN MAY, MFA AND WOMEN IN HOUSING AND FINANCE, INC. (WHF) CO-HOSTED OUR THIRD ANNUAL WOMEN’S LEADERSHIP FORUM. THE EVENT BROUGHT TOGETHER LEADING WOMEN IN HOUSING, FINANCE, AND POLICY FOR REMARKS, A PANEL DISCUSSION ON WHAT IT TAKES TO ADVANCE IN THE WORKPLACE, AND NETWORKING.

The open press forum, “What It Takes to Advance,” was moderated by Donna Borak, senior economics writer at CNN. She was joined by Roz Brooks, managing director, Government, Regulatory Affairs and Public Policy at PricewaterhouseCoopers, Rebekah Goshorn Jurata, deputy assistant secretary for International Financial Markets at the U.S. Department of the Treasury, Andrea Pfenning, president and COO at the Bank of New York Mellon, Government Securities Services, and Maggie Sklar, senior counsel to the Chairman at the CFTC.

A panel discussion at MFA’s Women’s Leadership Forum, May 2018.

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Panelists discussed an array of topics, including the challenges they have faced, lessons they have learned that have shaped their respective paths, the distinction between mentorship and sponsorship, and building confidence and embracing risks.

In her opening remarks, MFA Chief Commercial Officer Brooke Harlow highlighted the importance of such events in facilitating discussion around what it takes to advance and succeed as women in the workplace.

Attendees listen to a panel discussion at MFA’s Women’s Leadership Forum, May 2018.

Andrea Pfenning, President and COO at the Bank of New York Mellon; Maggie Sklar, Senior Counsel to the Chairman at the Commodity Futures Trading Commission; MFA Chief Commercial Officer D. Brooke Harlow; CNN Senior Economics Writer Donna Borak; MFA President and CEO Richard H. Baker; Joanna Girardin Shapiro, President, Women in Housing and Finance Inc., and Managing Director, Global Client Management, BNY Mellon; Roz Brooks, Managing Director, Government, Regulatory Affairs and Public Policy at PricewaterhouseCoopers; and Rebekah Goshorn Jurata, then-Deputy Assistant Secretary for International Financial Markets at the U.S. Department of the Treasury.

MFA 2018 YEAR IN REVIEW | 45

Education

HEDGEFUNDAMENTALS.ORG AND THE MFA INSTITUTIONAL INVESTOR MAP – RE-LAUNCHED IN 2016 AND 2017 RESPECTIVELY – ARE THE CORNERSTONES OF MFA’S EFFORTS TO EDUCATE KEY STAKEHOLDERS ABOUT OUR INDUSTRY’S WORK. THE SITES ARE DESIGNED TO TELL A STORY THAT IS UNDERSTANDABLE TO ANY VISITOR, REGARDLESS OF THEIR LEVEL OF KNOWLEDGE OF THE FINANCIAL INDUSTRY.

MFA updated its Institutional Investor Map with 2018 Preqin data and added two additional white papers – An Introduction to Short Selling and the second edition of The Role of Alternatives in Today’s Capital Markets – to HEDGEFundamentals.org this year.

MFA uses its various social media channels to promote its educational materials efficiently and in the most targeted manner possible.

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Institutional Investor Map The Institutional Investor Map, using data from Preqin, highlights how leading institutions in every state use hedge funds to help diversify their investment portfolios, manage risk and meet their financial obligations. The map and other educational content is available at HEDGEfundamentals.org.

MFA 2018 YEAR IN REVIEW | 47

MFA Management Leadership Team Richard H. Baker | President & CEO rbaker@managedfunds.org Anthony D. Coley | Executive Vice President, Communications and Senior Advisor to the President & CEO acoley@managedfunds.org Louis Costantino, Jr. | Executive Vice President & Managing Director, Government Relations lcostantino@managedfunds.org Peter Donovan | Executive Vice President & Managing Director, COO pdonovan@managedfunds.org D. Brooke Harlow | Chief Commercial Officer bharlow@managedfunds.org David M. Landers | Executive Vice President & Managing Director, Government Relations dlanders@managedfunds.org Michael N. Pedroni | Executive Vice President & Managing Director, International Affairs mpedroni@managedfunds.org

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Staff Benjamin Allensworth | Associate General Counsel ballensworth@managedfunds.org

Carlotta King | Associate General Counsel cking@managedfunds.org

Mohamed Al-Said | Coordinator, Operations mal-said@managedfunds.org

Lynn Kirk | Executive Assistant, President & CEO lkirk@managedfunds.org

Tasha Ashby | Executive Assistant, Legal tashby@managedfunds.org

Maurice Maloney | Director, International Affairs mmaloney@managedfunds.org

Roscoe Butler | Senior Coordinator, Member Services rbutler@managedfunds.org

Michael Mbugua | Manager, Information Technology mmbugua@managedfunds.org

Megan Cyganowski | Coordinator, Conferences and Events mcyganowski@managedfunds.org

Melanie Michel | Receptionist/Office Assistant mmichel@managedfunds.org

Amy D’Annunzio | Vice President, Conferences and Events ad’annunzio@managedfunds.org

Beth Moore | Coordinator, Public Affairs emoore@managedfunds.org

Brendan Gilfillan | Director, Communications bgilfillan@managedfunds.org

Sarah Morgan | Vice President, Government Relations, PAC and Political Engagement smorgan@managedfunds.org

Tira Grey | Director, Public Affairs tgrey@managedfunds.org Kelly Gürdeniz | Data Manager, Public Affairs kgurdeniz@managedfunds.org Brice Hadden | Director, Accounting & Finance bhadden@managedfunds.org Jennifer Wu Han | Associate General Counsel jhan@managedfunds.org

Matthew Newell | Associate General Counsel mnewell@managedfunds.org Ariel Paulk | Executive Assistant, Operations & Communications apaulk@managedfunds.org Bryan Petrich | Manager, Communications bpetrich@managedfunds.org

Laura Harper Powell | Associate General Counsel lharperpowell@managedfunds.org

Taylor Robertson | Executive Assistant & Events Coordinator, Public Affairs trobertson@managedfunds.org

Rachael Holland | Manager, Public Affairs rholland@managedfunds.org

Sara Vargo | Manager, Government Relations svargo@managedfunds.org

MFA 2018 YEAR IN REVIEW | 49

MFA Delivers Value Across All Functional Areas of Your Firm In addition to six global conferences, MFA offers members access to year-round operational, legal, and compliance training as well as an unparalleled global peerto-peer network. MFA’s quarterly forums give members the unique opportunity to meet in small working groups by function to collaborate on industry best practices, anticipate business risks, and expand their peer network.

MFA also engages with the industry’s top stakeholders (including primes, legal, and accounting firms) to offer members in-depth seminars on new rules and regulations affecting the industry. These forums and seminars are coveted educational and networking opportunities for MFA members. In addition, many of these seminars feature engagement with the broader allocator community with whom we work closely on an array of policy and operational issues.

MANAGED FUNDS ASSOCIATION

50 | MFA 2018 YEAR IN REVIEW

Human Resources

CIO and Portfolio Managers

Business Development & Marketing

Investor Relations

IT/CTO

Government Relations

Operations

COO

General Counsel

CCO

CFO Risk Management

For more information email memberservices@managedfunds.org

MANAGED FUNDS ASSOCIATION

600 14th Street, N.W., Suite 900 | Washington, DC 20005 | 202.730.2600 546 Fifth Avenue, 12th Floor | New York, NY 10036 | 212.542.8460 managedfunds.org | @MFAUpdates