The SEC's Multipronged Focus On Advisory Fees—Implications For Private Fund Managers

Any doubts over whether the U.S. Securities and Exchange Commission considers advisory fees to be a focus area for 2022 were dispelled over the past several weeks. In four separate public statements, the SEC and the Staff of the Division of Examinations have set the stage for a comprehensive review of the "market" for advisory fees in a private funds context, as well as for a potentially intense review of how fees are disclosed, calculated, and assessed by private fund managers.

The Tone at the Top 

The highest profile statement on advisory fees came from SEC Chairman Gary Gensler, who, in recent remarks at the Institutional Limited Partners Association Summit,¹ asserted that fees in the registered funds space have come down considerably since his time on Wall Street, while those in the private funds space have not dropped to the same degree-even as aggregate private fund assets have increased. Benchmarking off the "2-and-20 model," the Chairman argued that