The Financial Systemic Oversight Council could end the advantages large asset managers offer -- specialization and lower costs -- if it designates them as systemically important, the chief executive officer of one of the nation’s largest hedge funds, Citadel Holding’s Ken Griffin cautioned Monday.

Speaking at an FSOC roundtable on asset managers, Griffin warned these benefits would be lost because the non-bank Systemically Important Financial Institutions designation would probably lead institutional investors to pull assets out and bring the funds totally under their own control.

Griffin added the asset management industry helped the nation recover from the financial crisis faster than Europe because the industry became an important source of lending for business.  European companies, in contrast, have to go to banks for 80 percent of their loans.

“I don’t see systemic risk lying in our asset managers. I see systemic risk lying in the megabanks around the world,” said the chief of the hedge fund with $17 billion in assets under management for institutional and wealthy individual investors.

BlackRock Vice Chairman Barbara Novick emphasized asset managers don’t have the power to make risky decisions that would potentially imperil the entire financial system.

Treasury Department Under Secretary for Domestic Finance Mary Miller said the Council has not decided if it will designate any asset management companies as systemically important. “It is possible council may take no action,” she said.

She added FSOC members do recognize asset management companies are different from banks because they do not put their own money at risk.

At the meeting, CFA Institute President and CEO John Rogers contended increased hiring of risk managers in the asset management industry has significantly increased the ability of these firms to manage risks.

A major reason asset management companies are opposed to SIFI designation that was not brought up at the roundtable is that it could mean the 14 asset management firms with more than $100 billion in assets under management would be required to hold a capital buffer that would reduce their returns and make their businesses less attractive to investors.

Last week, a conservative think tank calculated the capital requirement could cost fund retirees $100,000 each.

At a follow-up hearing in Congress Tuesday, Vanguard Chairman and Chief Executive Officer William McNabb said SIFI designation would increase costs substantially for the largest asset managers.

“They are highly efficient, relatively low-cost funds within their asset classes. Their expense ratios range from 76 basis points down to 3 basis points, with an asset-weighted average of 31 basis points. On that base, it would not take much in added fees, assessments and capital costs to increase quite significantly the expenses borne by investors,” the Vanguard head said in prepared remarks for the House Financial Services Committee.

He added the Federal Reserve could force fund managers to make decisions that would violate their fiduciary duties.