The Investment Company Institute (ICI) told the Federal Trade Commission (FTC) there are some misconceptions about the role of asset managers in its view of common stock ownership.
Many believe that institutional investors who hold stock of companies in concentrated industries—such as airlines or banks—decrease competition and raise consumer prices, even when their holdings are small. The FTC said it would hold hearings on competition and consumer protection in the 21st century. The FTC issued a request for comment on various issues, including “the analysis of acquisitions and holding of a non-controlling ownership interest in competing companies.”
ICI sent a letter to the FTC with information about how investment advisers and their regulated fund clients operate. ICI also sought to dispel misrepresentations infusing discussions about the common ownership hypothesis.
“The FTC’s request for comment provides an opportunity to set the record straight on the role that investment advisers and regulated funds play in the financial markets, and how they interact with the companies in which they invest,” ICI Chief Economist Sean Collins said. “Claims that ‘common ownership’ by institutional investors decreases competition are based on misunderstandings and misinformation about the asset management industry, as well as unconvincing empirical work.”
The letter warns the FTC not to conflate asset ownership and asset management, essentially treating an adviser and its clients as the same. It notes the range of investment strategies that an adviser might pursue on behalf of its clients, belying the assumption that an adviser and its clients take a uniform “view” of a stock or industry.
Ultimately, ICI believes regulators should not consider measures designed to restrict or limit common ownership.
“A growing body of legal experts, regulators, and academics have warned that policy proposals to address alleged anticompetitive effects associated with common ownership could cause significant harm to millions of investors and to our capital markets at large,” ICI General Counsel Susan Olson said. “We hope the FTC will recognize that such proposals are unwarranted and inappropriate.”