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Your Forum Day Two (and a little more of Day One) Digest

Neuberger Berman COO says AML/KYC regs will, and should, come to the US private markets; A universal guide to valuations; State Street and iCapital join up to target HNWIs, family offices, and (eventually) retail.

A day of executive vaticination: After Carl Thoma, on day one of the Forum, foretold the downsizing of fees and the elimination of favorable tax treatment for carry, Neuberger Berman COO Brien Smith told Private Equity International’s Isobel Markham that Anti-Money Laundering and Know Your Client regulations will inevitably come to US private markets. (FinCEN originally proposed AML rules for registered investment advisors in 2002. That was retracted and reproposed in 2015. A former SEC enforcement agent and FinCEN official who developed the original proposal told me there’s no indication it will go anywhere.) But Smith says that not only will they come, they should.

A bit of news from outside the Forum: The potential entry of retail money into private markets is a big, and hotly contested, topic. But some see it as an inevitability, given the shrinking public markets and eternally low rates. (And of course, there are supporting negative arguments: is there any good reason first-loss equities are more appropriate to retail? Should I be allowed (in the US) to buy legally complex bail-in-able – “Total Loss Absorbing Capacity” – bank debt any more than shares in a private fund? Etc.) So the partnership between State Street and iCapital to ‘democratize’ private market investing seems a logical move, especially in light of recent SEC initiatives. Connor Hussey spoke with the two firms, who said in a press release that the new platform was aimed at (relatively underserved) high-net-worth individuals and family offices (though some of the latter are acting as their own PE firms, now). But also: yes, retail too, when that happens.

Valuation contemplation: Colleague Chase Collum has a brief, incisive guide to valuations, via expert panelists at the Forum. One interesting takeaway: be wary of relying on co-investor valuations.

The SEC: I interviewed Bill Hinman, head of CorpFin at the SEC, in a keynote address at the end of Day Two. Unfortunately, I am barred from writing about it, but it was well received by the audience, and apparently I made him laugh – not because I’m using a ‘proprietary’ valuation system for the fraudulent unregistered bitcoin fund I’ve been running out of my studio apartment (I am not). Two lessons to be learned, here: 1) You should go to the Forum next year and 2) If you do, stick around for the last keynote.

Finally: Keep an eye on the site for more coverage: it will continue to flow.

Email prepared by Graham Bippart