Shouldn’t Bank PE Funds Plan for Worst, While Hoping for Best?

Morgan Stanley Investment Management yesterday announced that it has raised $585 million for a new global secondaries fund. From what I understand, however, there is no LPA provision about what will happen if Congress passes the Volcker Rule.

Am I the only one who finds this odd? LPs and GPs plan for all sorts of contingencies when designing fund docs, from key-men triggers to LP default protocols to no-fault divorces. Wouldn’t it behoove both parties to know (officially) what happens if the federal government tells banks like Morgan Stanley that they no longer can house private equity funds?

I know most of this fund-raise occurred while Paul Volcker was still an old man being ignored on the sidelines, but the final close happened after his eponymous rule was included in the Financial Reform Bill’s working draft. I can’t believe anyone – everyone? – is so willing to just close their eyes and hope it doesn’t become law…