The SEC’s 2023 private fund adviser rules impose unprecedented transparency on hedge funds and private equity. Advisers must now provide quarterly performance/fee reports and obtain annual audits. The rules ban certain preferential treatment that advantaged large investors and require clearer conflict disclosures.

These changes aim to protect institutional investors like pensions and endowments, but ripple effects reach individual investors through retirement plans. While increasing compliance costs may squeeze smaller managers, the rules could improve industry standards overall.

Notably, the rules prohibit “side letters” that give some investors better terms unless disclosed to all. Advisers must also document annual compliance reviews, creating new operational requirements. The full impact will emerge as the industry adapts to this more regulated era for alternatives.