Most investors don’t realize it, but Wall Street has significant leverage over the asset management industry.  This leverage results from the asset management industry competing to manage your assets.  Naturally, the competition is highly focused on the asset manager’s investment track record.  As a result, asset managers are very concerned with protecting the investment track record.

Wall Street knows this concern and Wall Street uses this concern to capture the asset management industry.

For example, imagine as an asset manager you champion transparency.  This is an immediate threat to both Wall Street’s earnings from opacity and its ability to have its losses socialized by taxpayers.  Naturally, Wall Street is going to want to discourage you from championing transparency.  It does this by the not so subtle technique of limiting your access to hot new deals or buying opportunities for existing deals.  Instead, it steers these to your competitors who are not championing transparency.  Wall Street has just tilted the playing field in an attempt to give your competitors a better investment track record.

This technique for capturing the asset management industry and blunting financial reforms Wall Street doesn’t want is very effective.  After all, asset managers want to keep their jobs.

One benefit of the Transparency Label Initiative™ is it addresses Wall Street capturing the asset management industry.  The Initiative does this by making asset managers disclose whether they are restricted to only purchasing securities that have received a label or they are free to blindly gamble with the investors’ money on opaque, rigged securities.

This disclosure limits Wall Street’s ability to capture the asset management industry by fundamentally changing the competition between asset manager investment track records.  With this disclosure, investors can now look at how the asset managers generated their track record.  Did they produce superior performance only investing in transparent markets or did they produce their track record by being lucky and having their blind bets pay off?