US President Donald Trump will not repeal too many regulations introduced following the global financial crisis, despite his recent claims, a senior executive at investment bank Morgan Stanley told delegates at the PERE Asia Summit.
John Klopp, who heads the investment bank’s recently formed real assets division, told the 500-plus audience, that he did not expect reforms to greatly impact the private real estate sector in the short term.
“Is he going to vaporize regulation overnight?” Klopp asked. “I don’t think so. I just don’t anticipate everything created post-GFC will be repealed. I just can’t see that.”
US financial institutions including Morgan Stanley saw their principal investment activities curtailed by regulation brought about via the Dodd-Frank Wall Street Reform and Consumer Protection Act introduced in July 2010. The regulation effectively saw such institutions restricted to a 3 percent co-investment cap in the funds they operate, an element that influenced the closure of a number of principal investment units across the sector, including private real estate investment platforms.
“It didn’t hold us back,” said Klopp (pictured). This week, PERE broke the news that the firm’s real estate division, Morgan Stanley Real Estate Investing, a division Klopp previously co-led, had raised $1.9 billion from investors for its latest opportunistic property fund, New Haven Real Estate Fund IX Global. As with its predecessor vehicle, MSREI raised the capital within the parameters of Dodd-Frank, a factor which led Klopp to say: “We are one of the last men standing after deciding post-crisis we will stay in for the long term.”
However, other keynote speakers at the two-day event warned about regulatory changes introduced by the Trump administration. Hours before the president addressed his first session of Congress on Tuesday with a speech aimed squarely at repealing slews of US regulation, Jim Barry, another senior executive recently elevated to the newly created role of head of real assets at asset management giant BlackRock, said: “We should all definitely be paying more attention to regulation and policy risk.”
The firm’s former head of infrastructure noted how his background in an asset class more steeped in political sensitivity had informed his view and admitted real estate carried fewer issues in that regard. But he added: “An understanding of this could be the difference of a few hundred basis points on pricing.”