Policy Issues

Restrictions on Proprietary Trading and Certain Interests in and Relationships with Hedge Funds and Private Equity Funds - Volcker Rule

January 27, 2012

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In a formal comment letter to regulators (developed with input from the Real Estate Capital Policy Advisory Committee [RECPAC]), The Roundtable explained that some financial firms sponsor private equity funds and other “third party” investment funds that invest in commercial real estate, and that the pending Volcker rule could essentially push financial services companies out of the asset management and real estate fund business.

The real estate sector “…is a very important catalyst to the broader economy, and a significant employment base – needs policies that will facilitate equity investment in commercial real estate. The Volcker Rule, if applied to commercial real estate, does just the opposite. It would limit the amount of private equity capital available, without advancing the stated purpose of the Act to reduce systemic risk,” the letter stated.

This would further constrain real estate capital and credit flows at a time of weakened property values and net operating income (particularly in non-gateway markets), and amid a looming wave of maturing commercial debt that will need to be refinanced.