Finance

The deal means Amazon customers in the U.K. can continue using Visa credit cards, as previously announced by the two companies.
Amazon will also drop a 0.5% surcharge on Visa credit card transactions in Singapore and Australia, which it introduced last year.
Amazon has been piling pressure on Visa to lower its fees, signaling growing frustration from retailers over the costs associated with major card networks.

Visa payment cards laid out on a computer keyboard.
Matt Cardy | Getty Images

Amazon has reached a global agreement with Visa to settle a dispute over the credit card giant’s fees.
The deal means Amazon customers in the U.K. can continue using Visa credit cards, as previously announced by the two companies. Amazon will also drop a 0.5% surcharge on Visa credit card transactions in Singapore and Australia, which it introduced last year.

Last month, Amazon said it had dropped plans to stop accepting Visa credit cards in Britain, two days before the change was expected to take place. The companies said at the time that they would continue talks on a broader resolution to their spat.
“We’ve recently reached a global agreement with Visa that allows all customers to continue using their Visa credit cards in our stores,” an Amazon spokesperson told CNBC via email. “Amazon remains committed to offering customers a payment experience that is convenient and offers choice.”
Amazon has been piling pressure on Visa to lower its fees, in a series of moves that signaled growing frustration from retailers over the costs associated with major card networks, as well as the e-commerce giant’s market power and sway over its partners.
The likes of Visa, Mastercard and American Express now face intense competition from a flood of fintech challengers, from “buy now, pay later” services like Klarna to open banking, a technology that lets start-ups effectively bypass traditional payment rails such as cards.
In an emailed statement to CNBC, Visa said its agreement with Amazon would also see the two collaborate on “new product and technology initiatives to ensure innovative payment experiences for our customers in the future.”

Both companies declined to comment further on the terms of their agreement when asked by CNBC.
So-called “swipe” fees, which are charged to merchants each time a customer uses their card, have long been a point of contention for businesses.
Roger De’Ath, U.K. country manager at fintech firm TrueLayer, said the Amazon-Visa spat highlighted the “fundamental need for new payment solutions.”
“For too long, cards have been retrofitted into online checkouts, creating an invisible web of hidden costs and unwieldy payment structures that affect the cost base of every single retailer,” De’Ath said via email.

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Check out the companies making headlines before the bell:
Walmart (WMT) – Walmart stock rose 2.9% in the premarket after the retail giant reported better-than-expected quarterly results. Walmart earned an adjusted $1.53 per share, 3 cents above estimates, issued an upbeat forecast, and announced a dividend hike.

AutoNation (AN) – The auto retailer earned an adjusted $5.76 per share for the fourth quarter, beating the consensus estimate of $4.96. Revenue was also above estimates, driven by a 55% surge in used vehicle sales. AutoNation shares jumped 3% in premarket trading.
DoorDash (DASH) – DoorDash soared 24.1% in premarket trading after the food delivery service issued an upbeat outlook for the current quarter. Doordash reported a fourth-quarter loss but saw a 69% surge in revenue for 2021 even as restaurants reopened for dine-in service.
Cisco (CSCO) – Cisco beat estimates by 3 cents with adjusted quarterly earnings of 84 cents per share. The networking equipment and software maker also reported better-than-expected revenue and issued an upbeat full-year forecast as it sees particularly strong demand from cloud computing companies. Cisco rose 3.5% in the premarket.
Nvidia (NVDA) – Nvidia reported adjusted quarterly earnings of $1.32 per share, 10 cents above estimates. The graphics chip maker also reported better-than-expected revenue for the quarter and gave an upbeat outlook. However, the stock came under pressure on concerns about flat profit margins and its exposure to the cryptocurrency market. Nvidia was down 2.5% in premarket action.
Palantir Technologies (PLTR) – The software platform provider’s stock slid 8% in premarket trading after quarterly earnings fell short of forecasts. Palantir’s adjusted profit of 2 cents per share was half of what analysts predicted, although revenue exceeded forecasts.

Tripadvisor (TRIP) – Tripadvisor tumbled in the premarket after reporting an unexpected quarterly loss and revenue that fell short of analyst forecasts. The travel review site operator said it expects significant improvement in the travel market this year after what it called “unexpected periods of virus resurgence” in 2021. Shares tumbled 7.9% in premarket trading.
Fastly (FSLY) – Fastly shares plummeted 31.9% in the premarket after the internet content delivery company gave lower-than-expected 2022 guidance. Fastly reported a narrower-than-expected fourth-quarter loss and revenue that came in above consensus estimates.
Hasbro (HAS) – Hasbro rallied 4% in premarket trading after activist investor Alta Fox Capital Management nominated five directors to the toy maker’s board. Alta Fox is pushing for Hasbro to spin off its fast-growing games unit.
Cheesecake Factory (CAKE) – The restaurant operator’s shares jumped 4% in the premarket even though earnings came in below forecasts. A revenue beat was negated by increased input costs, but Cheesecake Factory is planning a price hike in new menus now being printed and said it may lift prices further later this year.

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International investment inflows to mainland Chinese stocks have increased since the fourth quarter, according to EPFR Global.
The positive turn on sentiment comes as investment banks upgrade Chinese stocks.
However, the data shows global emerging markets funds have increased their allocations more to India than mainland China, amid uncertainty about regulation and economic growth.

A public screen displays the Shenzhen Stock Exchange and the Hang Seng Index figures in Shanghai, China, on Monday, Feb. 7, 2022.
Qilai Shen | Bloomberg | Getty Images

BEIJING — International investors are putting more money into Chinese stocks, even as local investors have remained cautious on the mainland markets.
Mainland Chinese stock funds saw net inflows of $16.6 billion in January — only the fourth time since the pandemic that monthly inflows have exceeded $10 billion, according to research firm EPFR Global. That followed nearly $11 billion in net inflows in December, the data showed.

“Investor interest in China has actually strengthened coming into the fourth quarter of last year,” Cameron Brandt, director of research at EPFR, said in a phone interview last week. “The driver there I think is a perception — especially among institutional investors — that in the emerging markets space, China is, for a variety of reasons, something of a safe play this year.”
The latest wave of buying is from institutions, rather than retail investors whose interest in China dropped off since early last year, Brandt said.
The divergent interest comes as global investment firms have turned increasingly positive on mainland Chinese stocks in the last several months.
Analysts are betting, in part, that Beijing wants to ensure growth in a year the ruling Chinese Communist Party is set to choose its next leaders at a national congress in the fall. At the same meeting, President Xi Jinping is expected to take on an unprecedented third term in power.
“Everything will need to look quite to perfection for [such] a monumental event,” Jason Hsu, chairman and CIO of Rayliant Global Advisors, said in a phone interview last week. “For anyone who is a rational investor, this is probably as favorable a sentiment as you’re going to get.”

China has also become “a good contrarian play” this year because the local market is entering a period of stimulus and easier policy, while the U.S. Federal Reserve embarks on a tightening cycle, Hsu said.

Goldman Sachs and Bernstein are so optimistic that they each released lengthy reports in the last few weeks recommending mainland Chinese stocks, also known as A-shares.
The upbeat calls come despite worries about how regulatory uncertainty may have made those stocks “uninvestable.”
“We believe China A shares, a US$14tn asset class, have become more investable given the ongoing liberalization and reform measures in the Chinese capital markets,” Goldman’s chief China Equity Strategist Kinger Lau and his team said in an 89-page report Sunday.
In the last 18 months, Beijing has cracked down on alleged monopolistic practices by Chinese internet companies and property developers’ high reliance on debt, among other issues. The sometimes abrupt policy changes have surprised global investors.
Global emerging markets funds have turned to India in the meantime, EPFR data showed.
“Managers of funds who run diversified funds, they’re less enthusiastic about China, certainly relative to other markets,” Brandt said.
Average allocation to China has fallen from 35% of the portfolio in the third quarter of 2020 to 27% as of Jan. 1, according to Brandt. During the same period, he said the funds’ allocation to India rose from 8.5% to 12.7%.

Market pessimism in China

Although the mainland Chinese stock market is the second largest in the world by value, it differs significantly from that of the U.S., the world’s largest.
Speculative retail investors rather than institutions dominate the mainland market, which for years has drawn comparisons to a casino.
But there have been signs of progress.
In a sign of how the market is maturing, index giant MSCI decided in 2018 to add some China A-shares to the benchmark MSCI Emerging Markets Index. The move forced international funds tracking the index to buy more A-shares. But retail investors still dominate the mainland market by far.

Our overall view is this year, [the] China market is not an easy bull market. It’s more likely to be buying on hope and selling on fact and results.

China equity strategist, Bank of America Securities

Weak onshore sentiment, along with better opportunities in developed markets, have contributed to J.P. Morgan Asset Management’s neutral view on Chinese stocks since early last year, Sylvia Sheng, global multi-asset strategist at the firm, said in a phone interview Monday.
She said if growth improves in the second quarter, sentiment could turn as well, noting: “We are actually looking to get more positive on Chinese equities.”
The Shanghai composite is up about 3% for February to-date after a week-long closure for the Lunar New Year holiday. The index had kicked off the year with a decline of 7.65% in January — its worst month since October 2018. Last year, the index posted relatively muted gains of 4.8%.
Everyone’s sentiment on investing in A-shares has dropped significantly, Schelling Xie, senior analyst at Stansberry China, said in a phone interview Friday. He pointed to uncertainty about the degree of change on regulation and economic growth.
Although some economists have said the worst of China’s regulatory crackdown is over, they also said it doesn’t mean a reversal or an end to new rules.
It will take time for the market to rebuild confidence, but it is not appropriate to be overly pessimistic right now, Xuan Wei, chief strategist of China Asset Management, said in a note. He added that there are opportunities in new energy and technological growth stocks.

China opening to foreign finance

While analysts assess Chinese stock performance, the mainland market increasingly offers business opportunities for international investment firms.
The financial industry is one of the few areas in which Beijing has relaxed ownership restrictions in the last few years. The policy changes have allowed BlackRock, Goldman Sachs and UBS among others to buy full control of their local securities or mutual fund operations.
“One of the reasons why we’re bullish is we work in an area where China has really opened up in a big, big way,” said Brendan Ahern, chief investment officer of KraneShares. The firm sells one of the primary U.S.-listed exchange-traded funds that tracks Chinese internet stocks, KWEB.

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“In general, I think there’s this disparity between what the Chinese think about China and what foreign investors think about China,” Ahern said.
KWEB is up 3.8% for the year so far after dropping by more than 50% in 2021. Hong Kong’s Hang Seng index is up about 5.5% year-to-date, while the Shanghai composite is down about 4.7%.
Overseas investors generally “like to buy China for growth” rather than banks and other industries with many state-owned enterprises, said Winnie Wu, China equity strategist, Bank of America Securities.
However, she noted the state-owned businesses have led recent outperformers, a trend she doubts can lead to sustained gains for the market.
“Our overall view is this year, [the] China market is not an easy bull market,” she said. “It’s more likely to be buying on hope and selling on fact and results.”

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Stock futures dipped in overnight trading as investors digested corporate earnings reports, updates from the Federal Reserve and developments in the Russia-Ukraine conflict.
Futures on the Dow Jones Industrial Average shed about 35 points, or 0.1%. S&P 500 futures and Nasdaq 100 futures each ticked down about 0.2%.

A slew of companies reported quarterly results after the bell Wednesday. DoorDash surged more than 27% after hours. Cisco and Applied Materials both added more than 2% in extended trading.
The S&P 500 in Wednesday’s regular trading session closed little changed, while the Dow shed nearly 55 points and the Nasdaq Composite dipped 0.1%.
The major stock averages came off their lows Wednesday after the release of minutes from the Fed’s January meeting.
The minutes showed the Fed is prepared to hike interest rates and reduce its balance sheet soon, as investors had already expected.
“Marketwise it’s not the barn burner it could have been,” said Michael Schumacher, director of rates at Wells Fargo. “I think this tells us very little about Fed policy.”

Ongoing tension at the Russia-Ukraine border continued to impact market sentiment.
NATO officials on Wednesday accused Russia of increasing troop numbers at the Ukrainian border. U.S. and Russian aircraft in the Mediterranean Sea flew close to each other over the weekend, The Wall Street Journal reported Wednesday
Investors are awaiting quarterly reports Thursday from Walmart, Airbus, Autonation and Nestle.
Weekly jobless claims numbers will also be released Thursday morning.

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A DoorDash sign is pictured on a restaurant on the day they hold their IPO in New York, December 9, 2020.
Carlo Allegri | Reuters

Check out the companies making headlines after the bell: 
DoorDash — DoorDash shares surged more than 32% in after-hours trading despite a wider-than-expected quarterly loss. The delivery company reported a loss of 45 cents per share while Wall Street expected a loss of 25 cents per share. However, DoorDash’s fourth-quarter revenue of $1.3 billion beat estimates.

Fastly — The cloud computing services provider saw its shares plunge more than 22% after hours even after a better-than-expected earnings report. Fastly posted an adjusted loss of 10 cents per share on revenue of $97.7 million. Analysts expected a loss of 16 cents per share on revenue of $92.5 million, according to Refinitiv. The company guided to a wider-than-expected first-quarter loss per share.
Cisco Systems — Shares of Cisco rose nearly 5% in extended trading after the company’s fiscal second-quarter report beat Wall Street expectations. The company posted adjusted earnings of 84 cents per share on revenue of $12.7 billion. Analysts surveyed by Refinitiv expected earnings of 81 cents per share on revenue of $12.65 billion. Cisco also gave a sunny outlook for the rest of its fiscal year.
Nvidia — Shares of Nvidia dipped more than 1% after hours despite a better-than-expected earnings report. The chipmaker posted an adjusted profit of $1.32 per share versus $1.22 expected. Revenue also topped the Refinitiv consensus estimate. However, first-quarter gross margin guidance came in slightly lower than analysts expected.

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TripAdvisor — TripAdvisor shares retreated 7.5% after hours as the company missed top and bottom-line expectations in its latest quarterly results. The company posted an adjusted loss of 1 cent per share versus the Refinitiv consensus of 8 cents earned per share. Revenue also fell short of expectations.
Fisker — Shares of the electric vehicle maker gained 4.3% in extended trading after the company’s quarterly financial results met Wall Street expectations. Fisker posted a loss of 47 cents per share.
Applied Materials — The semiconductor stock rose 3.9% in extended trading after the company beat analysts’ earnings estimates. Applied Materials reported first-quarter adjusted earnings of $1.89 per share on revenues of $6.27 billion. Analysts had expected a profit of $1.85 per share on revenues of $6.16 billion.

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Federal Reserve officials outlined plans for interest rate hikes and a reduction in the asset holdings on their balance sheet at their last meeting.
Minutes released Wednesday from the January session show concern about inflation and financial stability though members urged a measured approach to tightening monetary policy.
FOMC members noted that inflation was beginning to spread beyond pandemic-affected sectors and into the broader economy.

Federal Reserve officials set plans into motion at their most recent meeting to begin raising interest rates and shed the trillions of dollars in bonds on the central bank balance sheet, according to minutes released Wednesday.
Some officials at the meeting expressed concerns over financial stability, saying that loose monetary policy could be posing a substantial risk.

They indicated that interest rate hikes likely are on the way soon, and they said the unwind of the bond portfolio could be aggressive.
“Participants observed that, in light of the current high level of the Federal Reserve’s securities holdings, a significant reduction in the size of the balance sheet would likely be appropriate,” the meeting summary stated.
The policymaking Federal Open Market Committee decided after the two-day session that it would not raise interest rates yet but strongly indicated a hike is on the way as soon as March.
Despite the seemingly hawkish tone, stocks shaved losses after the release of the minutes.
“The market correctly interpreted them as dovish relative to expectations,” said Simona Mocuta, chief economist at State Street Global Advisors. “Frankly, I would call them anticlimactic.”

Markets have been on edge over the past several weeks as soaring inflation and hawkish talk from some Fed officials, in particular St. Louis Fed President James Bullard, has caused traders to price in the equivalent of seven 0.25 percentage point rate hikes this year. Market pricing eased some after the minutes release, with a 50-50 chance now of the Fed taking its benchmark rate up by 1.75 percentage points.
“There’s been so much hype recently that I think everybody was braced for a very hawkish tone in the minutes, and the minutes were more like, ‘We’ll do it, of course, but we’ll walk before we run,'” Mocuta said. “It seems enough for the Fed to do four hikes. Talk the hawkish talk, tell everybody that we are watching this closely, and if we need to do more we can do more.”

In addition to the rates talk, the committee set out procedures for how it will start unwinding its nearly $9 trillion balance sheet, which consists largely of bonds it has purchased in an effort to drive down rates and stimulate growth.
March is also the month when the asset purchase program is set to end, though some members at the meeting were hoping for a faster conclusion. Instead, the committee set forth a path in which the Fed will buy $20 billion in Treasurys over the next month and nearly $30 billion in mortgage-backed securities.
“A couple of participants stated that they favored ending the Committee’s net asset purchases sooner to send an even stronger signal that the Committee was committed to bringing down inflation,” the minutes said.

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Members discussed how the balance sheet reduction will occur. The most likely path is by allowing some proceeds from maturing bonds to roll off each month rather than being reinvested. However, some officials said it may be necessary to sell mortgages outright in an effort to get the balance sheet holding to purely Treasurys.
Since the meeting, fresh inflation readings have shown prices rising at the fastest pace in 40 years. The Fed targets inflation to average around 2%, and officials have conceded that policy needs to get tighter to bring prices down.
Inflation occupied a good deal of the discussion during the meeting, according to the minutes. The term is mentioned 73 times in the summary, with members saying that price increases have been stronger and more persistent than they had anticipated.
“Participants remarked that recent inflation readings had continued to significantly exceed the Committee’s longer-run goal and elevated inflation was persisting longer than they had anticipated, reflecting supply and demand imbalances related to the pandemic and the reopening of the economy,” the document stated.
FOMC members noted that inflation was beginning to spread beyond Covid pandemic-affected sectors and into the broader economy.
“Participants acknowledged that elevated inflation was a burden on U.S. households, particularly those who were least able to pay higher prices for essential goods and services,” the minutes said.
There also was discussion about financial stability. Officials noted that risks are coming from elevated asset prices as well as the rapid price increases in crypto assets.

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In this photo illustration the logo of Canadian e-commerce company Shopify Inc. is displayed on a smartphone.
Thomas Trutschel | Getty Images

Check out the companies making headlines in midday trading.
Roblox — Shares of the metaverse-focused gaming company plunged more than 25% after Roblox’s latest quarterly report missed Wall Street expectations. Roblox posted a loss of 25 cents per share on revenue of $770 million. Analysts surveyed by Refinitiv expected a loss of 13 cents per share on revenue of $772 million.

Shopify — The e-commerce platform tanked more than 18% in midday trading after the company said revenue growth for 2022 would be slower than the 57% it achieved in 2021. Shopify, however, beat on the top and bottom lines of its quarterly results.
Upstart — Shares of the consumer lending platform surged more than 35% after it reported earnings well above Wall Street estimates. Upstart reported earnings of 89 cents per share, topping estimates of 51 cents, according to Refinitiv. Revenue also beat forecasts. The company also issued strong first-quarter and full-year revenue guidance.
ViacomCBS – The media stock dropped 21% on Wednesday after the company, now known as Paramount Global, reported weaker-than-expected earnings for the fourth quarter. Bank of America also downgraded the stock to neutral, saying that Paramount’s focus on streaming lowered the chances of a takeover offer in the near term.
Macy’s — Shares of the department store rallied more than 4% after Evercore ISI upgraded Macy’s to outperform from in-line, saying in a note to clients that the retailer’s stock did not reflect the upside potential for its sales and profits.
Vacasa — The vacation-rental company’s stock rose more than 11% in midday trading after JPMorgan initiated coverage with an overweight rating, saying in a note that the company has some competitive edges over more established names in the space.

Airbnb — Shares of the vacation rental company jumped 5% after Airbnb reported better-than-expected results for earnings and sales in the fourth quarter. The company said the lead times for bookings in the U.S. and Europe have returned to prepandemic levels.
Generac — The stock allied more than 10% after earnings beating top and bottom line estimates for its quarterly results. The maker of generators and power equipment earned an adjusted $2.51 per share, 11 cents above estimates, as both commercial and residential sales rose more than 40%.
Kraft Heinz — Shares of the food company rose 3.5% after it reported better-than-expected earnings and revenue for the fourth quarter. Kraft Heinz report an adjusted quarterly profit of 79 cents per share, beating estimates by 16 cents. 
La-Z-Boy — The furniture company’s stock plunged more than 17% following a big earnings miss. La-Z-Boy reported earnings of 65 cents per share last quarter, well below the 89-cent consensus estimate, according to Refinitiv. The company said it experienced multiple production issues related to the pandemic.
— with reporting from CNBC’s Yun Li, Jesse Pound and Hannah Miao.

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Advice and the Advisor

The U.S. Securities and Exchange Commission and U.S. Department of Labor have taken recent regulatory steps aimed at private equity and other alternative investments.
The moves would raise transparency for investors and likely reduce the pool of 401(k) plan savers with private-equity exposure.

SEC chairman Gary Gensler testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on Sept. 14, 2021 in Washington.
Evelyn Hockstein-Pool/Getty Images

The Biden administration is lending a more cautious eye to private equity and other “alternative” investments such as hedge funds.
The U.S. Securities and Exchange Commission and U.S. Department of Labor have taken steps in recent weeks to boost transparency for investors and rein in the pool of retirement savers who can buy private equity.

Private equity refers to investment in an entity that isn’t publicly traded (unlike stock in companies such as Apple and Microsoft, which is available on a public exchange).

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The investment category is generally off-limits to anyone who isn’t an “accredited” investor, someone deemed to have a minimum level of income, wealth or expertise to participate. (Retirement plans pose a slightly different dynamic; in this context, the employer acts as a gatekeeper that can choose to make private equity available to its workers.)

“The Biden administration, through various agencies, is taking a deliberate look at the potential impacts of the private equity market, especially on retail and retirement investors,” said Dylan Bruce, financial services counsel for the Consumer Federation of America, an advocacy group.

What regulators are doing

The SEC on Feb. 9 proposed a multipronged rule to increase transparency, by requiring private-equity funds to issue quarterly statements detailing fees and performance, among other things.
It would also limit the preferential treatment some investors get, such as additional disclosures that may have a “material negative effect” on other investors, according to the SEC. It would also require an annual audit of private funds and prohibit funds from engaging in certain conflicts of interest.

Separately, the Labor Department published a notice on Dec. 21 designed to limit the scope of Trump administration guidance from June 2020.
The Trump-era labor agency laid out legal parameters for employers to consider if they’d like to offer employees a 401(k) plan fund with an allocation to private equity. But the Biden administration limited the memo’s application, though didn’t repeal it.

These well-heeled, well-represented investors are able to fend for themselves, and our resources are better spent on retail investor protection.

Hester Peirce
SEC commissioner

Specifically, the agency said employers already managing private equity for the company pension plan are likely best suited to analyze whether private equity makes sense for their 401(k); the department “cautions” other companies (i.e., those not fluent in private equity) from doing so.
“They put more ‘guardrails’ about what the June 2020 letter said,” Julie Stapel, a partner at law firm Morgan Lewis, said. “It’s not an endorsement or acceptance of widespread use of private equity … without that prior expertise and experience.”

More investors

The additional regulatory focus is largely because the market and access to private funds (like private equity, venture capital and hedge funds) have grown in the past few decades.
The funds hold $18 trillion in gross assets, according to SEC Chair Gary Gensler. Globally, private equity assets have grown tenfold since 2000, about three times the pace of public stocks over the same period, according to McKinsey, a consulting firm.
Further, 16 million households were eligible to buy private funds in 2019, up from 1.3 million in 1983, according to SEC data.
That amounts to 13% of all U.S. households in 2019, versus 1.6% in the early 1980s. The share likely increased after 2020, when the Trump administration expanded the pool of accredited investors.

“Sometimes, [the investors] are wealthy individuals,” said Gensler, who was appointed by President Joe Biden. “Often, though, they’re retirement plans, like state government pension plans, or nonprofit and university endowments.
“The people behind those funds and endowments often are teachers, firefighters, municipal workers, students and professors,” he added.
Consumer advocates worry about increased access. Private investments carry more risk and opacity and have less liquidity if an investor needs their money, they said.

Performance

But proponents tout the higher return potential of private equity relative to the public stock market.
Private equity yielded a 15.7% net annual rate of return, at the median, over the past decade, relative to 14.8% for the S&P 500 Index, according to an analysis by the American Investment Council, a trade group representing the private equity industry.
“The [regulatory] guidance reaffirms that private equity is a valuable investment option and an important part of a diversified portfolio,” said Emily Schillinger, a spokesperson for the American Investment Council, a trade group. “A wide range of data confirms that private equity delivers the strongest returns to public servants and retirees across America.”
The performance gap between private equity and public stocks has “narrowed,” according to a report by Michael Cembalest, chairperson of market and investment strategy at J.P. Morgan Asset Management.

In 2009, the average private-equity fund outperformed the S&P 500 by 15%. However, that outperformance has since fallen to 1% to 5% a year — which investors may not think justifies its illiquidity relative to public markets, Cembalest said.
Regulators deem accredited investors to have the knowledge and wealth to bear the financial risk of alternative investments.
Households must have a net worth of more than $1 million (excluding the value of a primary residence) to qualify. Individuals may instead qualify with annual income of more than $200,000 during the last two years (or $300,000 for married couples).
Those thresholds aren’t pegged to inflation, which is a primary reason the ranks of accredited investors have grown since the 1980s.
Not all SEC officials think more regulation for private equity is a good idea, though.
“These well-heeled, well-represented investors are able to fend for themselves, and our resources are better spent on retail investor protection,” SEC commissioner Hester Peirce, who was appointed by former President Donald Trump, said Feb. 9. “Accordingly, I am voting no on today’s proposal.” More