Tags: AAF | regulation | investment | managers

Study: Regulation of Investment Managers Could Cost Savers Big-Time

By    |   Thursday, 15 May 2014 08:48 PM

The Financial Stability Oversight Council is considering designating major money management firms as systemically important financial institutions (SIFIs), and that could hurt savers in a major way, according to a study from the American Action Forum.

The council already is looking at asset-management titans BlackRock and Fidelity Investments, say the study's authors, Douglas Holtz-Eakin, president of the AAF, and Satya Thallam, director of financial-services policy for the group.

Asset managers are different from banks, the report notes. While "banks borrow against their own capital and invest capital as a principal, asset managers such as mutual funds, act as agents on behalf other investors," helping investors reduce their risk through diversification, the study says.

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Capital requirements required by an SIFI designation would reduce returns for investors, Holtz-Eakin and Thallam write.

A 25-year-old who invests $10,000 in the highest return fund could lose out on more than $107,000 in investment gains over the next 40 years, thanks to the SIFI designation, the economists assert.

A 50-year-old could lose $44,000 by age 65.

The Investment Company Institute, which represents mutual funds, isn't too pleased with the idea of designating funds as SIFIs.

Doing so would "drive up shareholder costs, distort the fund marketplace and expose retirement savers and other fund investors to the liability of paying for bank bailouts," Paul Schott Stevens, president of the institute, writes in American Banker.

"If regulators have specific risks they want to address, they have plenty of tools to do so. And if the FSOC persists in this regulatory overreach, it should expect Congress' interest and concern only to grow."

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The Financial Stability Oversight Council is considering designating major money management firms as systemically important financial institutions, and that could hurt savers in a major way, according to a study from the American Action Forum.
AAF, regulation, investment, managers
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2014-48-15
Thursday, 15 May 2014 08:48 PM
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