Letter from Eric J. Pan

While this year has seen a continuation of the uncertainty and challenges of the COVID-19 pandemic, it has also been a year of new beginnings for ICI. For me personally, it has been a tremendous honor and privilege to succeed Paul Schott Stevens as the Institute’s new president and CEO. I have come to learn the quality of the staff, the dedication they bring every day to serving our members, and their work to reinforce the importance of the regulated fund industry.

I am very proud of everything we accomplished this past year, but, more importantly, I am even more excited for the future. The best is yet to come, and I hope that you—whether you are a fund company member, an independent director, a member of the investment management bar, or a partner and friend of the industry—see ICI as the place where we all can come together to make the industry stronger, more vibrant, and more beneficial to the investors we ultimately serve.

Our Wide-Ranging Engagement

We actively engaged this year on a wide range of issues—spanning the legislative, regulatory, and operations arenas—to produce favorable outcomes for regulated funds and their investors. This year has been especially challenging given the change in administrations, new leadership at the Securities and Exchange Commission (SEC) and other regulatory agencies, and an active policymaking agenda in Europe and in international standard-setting bodies.

The SEC adopted three major rulemakings—on fund-of-fund arrangements, funds’ use of derivatives, and fair valuation of portfolio securities—each with helpful refinements that reflected recommendations we made for the benefit of fund investors.

On Capitol Hill—and in a concerted public education campaign—we forcefully opposed a troubling proposal to alter the tax treatment of in-kind redemptions, highlighting the harm it could inflict on millions of Americans who invest in ETFs and some mutual funds to save for their long-term financial goals. Put forward by Senate Finance Committee Chair Ron Wyden (D-OR), the proposal threatened to subject middle-income investors to more frequent and larger capital gain distributions, needlessly raising the cost of investing for savers striving to build financial security.

The best is yet to come, and I hope you . . . see ICI as the place where we all can come together to make this industry stronger, more vibrant, and more beneficial to the investors we ultimately serve.

Elsewhere on the Hill, we came out in support of several initiatives to strengthen the US retirement system, including sensible provisions in the Securing a Strong Retirement Act (SECURE Act 2.0), the Retirement Security and Savings Act, and other committee proposals that would better enable Americans to achieve a secure retirement. Our efforts helped build bipartisan support for SECURE Act 2.0, and we will continue to urge Congress to back this legislation and send it to the president’s desk.

Our expert research team, always the backbone of our advocacy work, played an especially important role in discussions around money market funds and the analysis of the market turmoil of March 2020. In thorough, data-driven reports, high-profile roundtables with our members and other stakeholders, and formal comments to US and international policymakers, we demonstrated that money market funds did not cause or amplify stresses in the short-term funding markets in March 2020—and called for policymakers to conduct a holistic review of all market participants before considering any money market fund reforms.

On the operations front, we helped launch an initiative to shorten the settlement cycle for US securities from trade date plus two days (T+2) to T+1—building industry consensus, developing an approach to implementation, and outlining a detailed path for firms and regulators to navigate this complex process. The initiative—in collaboration with the Securities Industry and Financial Markets Association and the Depository Trust & Clearing Corporation—will reduce risks and costs for market participants, including for investors, while building on the benefits achieved in the move from T+3 to T+2 in 2017.

ESG AND D&I—FINDING OUR VOICE

The ICI Board of Governors has made ESG investing and diversity and inclusion (D&I) top priorities for ICI. We advocated for clearer, more comparable, and more reliable disclosure from public companies—both in the United States and globally—to ensure that funds have the information they need to help investors make informed sustainability-related investment decisions. And in a bold statement ahead of the 2021 United Nations Climate Change Conference (COP26), the Board endorsed concrete actions that the regulated fund industry can take to facilitate the transition and meet investors’ objectives.

Our efforts to promote D&I this year began with the publication of the results of a survey of our members on the diversity of the industry’s workforce and the fund director community. The results confirmed that the industry has much to do in this area, and the Institute helped lead the way in confronting this challenge.

We convened constructive public dialogues with D&I experts in Congress and academia. And we worked with members to develop and implement new targeted initiatives within firms and industrywide, aiming to ensure that women and minorities are fully represented at every level of the industry.

STEEPED IN A TRADITION OF MEMBER SERVICE

The accomplishments above are just a portion of our work this year. There are many more, which are described in this annual report.

As the world’s leading association of regulated funds, ICI is steeped in a tradition of member service, professional excellence, intellectual rigor, ethics, and teamwork. Alongside your enduring support, it’s those virtues that will enable the Institute to continue to effectively navigate the currents of finance and public policy. Thank you for your support and the critical role you play in our success.