HFMWeek Quotes Jason Daniel on Impact on Hedge Funds of Volcker Rule Easing

Akin Gump investment management partner Jason Daniel was quoted by HFMWeek in “Volcker loosening could allow smaller banks to invest in hedge funds,” an article addressing how the easing of proprietary trading restrictions under the Volcker Rule could affect hedge funds.

The Volcker Rule, mandated under the Dodd-Frank Act, prohibits banks with federally insured deposits from engaging in proprietary trading and from owning or controlling hedge funds. Daniel said the proposal “would allow banks to operate in a little broader capacity in their traditional market making role.”

The proposed changes, according to the article, raise the possibility of altering the definition of a “covered fund” to allow smaller banks to invest in certain liquid hedge funds strategies that do not engage in short-term trading, on behalf of their customers and not for their own trading purposes. Daniel said there is currently no concrete proposal to change the definition or to reduce the limitations of banks’ investments in private funds, although it is being explored.

The proposal, as noted in the article, is separate from a Senate bill that would raise the threshold at which banks are considered “too big to fail” from $50 billion to $250 billion. Daniel said that legislation would allow small banks “to escape the Volcker Rule and although they typically don’t invest much in hedge funds, this bill opens the door to smaller banks making hedge fund investments.”