New SEC Co-Investment Relief Framework: Increased Flexibility for Business Development Companies and Closed-End Funds
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Banking and Finance
- event Date
Wednesday, August 20, 2025
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
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This program will discuss the recent development from the Securities and Exchange Commission (SEC) permitting certain business development companies (BDCs) and closed-end investment companies to engage in co-investment transactions under a new, simplified, and principles-based framework. The panel will compare the new co-investment relief model with the prior framework and will explore how the new framework will affect investors and issuers.
Mr. Man is a partner in the firm's asset management and investment funds practice. He represents investment advisers, closed-end funds (including exchange-traded closed-end funds, registered funds of hedge funds, and interval funds), alternative mutual funds, and private funds (including hedge funds and funds of one).
Ms. Simon frequently counsels clients focused on making alternative asset classes and strategies available to a broader audience, including high-net-worth and retail investors. Her experience includes advising investment advisers, funds and boards of directors/trustees with regard to traditional and novel product offerings. Ms. Simon regularly advises on the practical and regulatory considerations central to the design, formation and ongoing operation of funds regulated under the Investment Company Act of 1940 (1940 Act), including interval funds, tender offer funds, business development companies (BDCs) and funds electing to be taxed as REIT). With clients ranging in size and background, from private fund sponsors to first-time sponsors of 1940 Act funds to longstanding 1940 Act fund complexes, Ms. Simon is well positioned to advise from a variety of vantage points. Also leading the firm's derivatives and commodities practice, Ms. Simon regularly assists registered and exempt commodity pool operators (CPOs) and commodity trading advisors (CTAs) in navigating multiple, and sometimes conflicting, regulatory regimes. She is a frequent author and lecturer on funds and derivatives, among other topics.
In recent months, the SEC has engaged in efforts to modernize and expand joint transactions and improve retail investor access to alternative investments and private markets. By removing several restrictive requirements, the SEC's new exemptive relief streamlines the co-investment process and offers sponsors greater flexibility in determining how best to structure co-investment opportunities with regulated funds.
Some of the key aspects of the new co-investment framework include a significant reduction in deal-specific board approvals, elimination of prescriptive allocation requirements, ability of regulated funds to participate in co-investments where a related party has a pre-existing investment, expanded access to follow-on investments, inclusion of joint ventures, and a reduction in board reporting requirements.
Although the SEC's new exemptive relief is considered a welcome change for the industry, some critical issues remain unresolved for regulated funds. These unaddressed issues include the requirement that affiliates must invest on the same terms and in the same classes of securities; affiliates must continue to share transaction fees (other than certain brokerage fees) on a pro rata basis; and there remains limited relief for principal transactions, making it difficult for a typical private equity strategy to function properly in a regulated fund.
In light of the new exemptive relief framework, private fund managers should consider amending existing co-investment orders or applying for new relief. Also, platforms may want to consider changes to their processes for co-investing among one or more regulated funds and affiliated funds, including updating their allocation and co-investment policies.
Listen as our expert panel reviews the SEC's new model of co-investment relief and provides guidance for funds wanting to take advantage of this more flexible co-investment framework.
I. Background on the new co-investment framework
II. How the new co-investment relief compares with the prior co-investment framework
III. Key changes and simplifications to co-investment procedures
IV. Practical implications
V. Unresolved issues
VI. Next steps for private fund managers intending to rely on the new relief
VII. Practitioner pointers and key takeaways
The panel will discuss these and other key considerations:
- What is the background regarding the SEC's new co-investment relief framework?
- How does the new co-investment relief framework differ from the prior framework?
- Does the new exemptive relief framework provide managers of BDCs and closed-end investment companies greater flexibility to engage in co-investment opportunities and enhance retail investor access to private markets?
- What are some key issues that were not addressed in the new relief model?
- What are key considerations and next steps for new or existing funds that want to take advantage of the new flexible co-investment framework?
