• |

    Apr. 2, 2026

Mechanics and Tax Treatment of Private Fund Conversions to Registered Funds (Part One of Two)

In recent years, we are seeing a “democratization” or “retailization” of private funds through the conversion of private funds to funds that are registered as closed-end investment companies under the Investment Company Act of 1940. Private fund conversions are appealing as a way to enable fund sponsors to expand their investor base by recruiting retail investors to join interval funds, tender offer funds and other types of registered funds. Some sponsors convert long-standing private funds to add a retail investment base, while others may form private funds with an end-goal of establishing registered funds after a brief ramp-up period. This first article in a two-part guest series by Faegre Drinker partner Leila E. Vaughan focuses on the mechanics of private fund conversions to regulated investment companies (RICs), the immediate tax consequences of the conversion, the requirements for the conversion to qualify as a non-taxable transaction and special issues as to certain owners of the converting private fund. The second article will analyze the benefits of RIC tax treatment, the requirements to qualify as a RIC, the consequences of failing to meet those requirements and the types of assets that may pose problems – with suggested solutions – for RIC compliance. See “Retailization Season Is Heating Up: A Private Fund Manager’s Guide to Structuring, Procedures and Fundraising” (Jun. 12, 2025); and “Inherent Obstacles and Promising Pathways to Retailization in the PE Industry” (May 29, 2025).

SEC Roundtable Examines Valuation, Structuring and Fee Issues for Retailization of Private Markets

The SEC has “an important mandate to ensure the responsible retailization of private markets,” said Blair Burnett, branch chief in the SEC Division of Investment Management’s Rulemaking Office, at the SEC’s Private Markets Roundtable. The agency seeks to “reduce regulatory barriers that prevent retail investors from accessing diverse investment opportunities in the private markets while maintaining, of course, core investor protections and appropriate safeguards.” Moderated by Burnett, the panel focused on investment vehicles providing access to private market strategies; valuation processes and concerns; issues posed by semi-liquid funds; and potential risks with fee structures. This article synthesizes the key takeaways from the discussion. See “After Retail Gets Access to Alts, Then What?” (Mar. 5, 2026).

Impact of the One Big, Beautiful Bill Act and New York’s Tax Regime on Fund Managers

At a program presented by the Manhattan Alternative Investment Network, a panel of tax professionals discussed hot topics in taxation for fund managers. The speakers examined the changes introduced by the One Big, Beautiful Bill Act, which took effect on July 4, 2025, including more generous depreciation, business interest, and research and development deductions; and the deduction for state and local taxes. They also discussed issues unique to New York-based managers, including relocating to lower-tax jurisdictions, residency rules and the impact of the New York City unincorporated business tax. The program featured Citrin Cooperman partners Steven Careccia and James Catalano; Hodgson Russ partner K. Craig Reilly; and Steve Waiculonis, founder of Luminarc Strategic Partners. This article synthesizes the key takeaways from the program. See “Expanded Qualified Small Business Stock Rules Under the One Big, Beautiful Bill Act” (Feb. 19, 2026); and “How the Big, Beautiful Bill Impacts the Big, Beautiful Private Funds Industry” (Aug. 21, 2025).

ILPA Report Assesses Institutionalization of Impact Investing Market

“Impact investing is no longer emergent, but a maturing industry distinguished by rising institutional participation,” according to a report (Report) jointly prepared by the Institutional Limited Partners Association; Tideline, which provides impact investing advisory and implementation services; and private markets adviser Campbell Lutyens. However, the impact investment market may not yet be ready to absorb institutional-scale capital. The Report sets out a framework of “core market-level conditions needed to support investors in channeling capital at scale and with impact integrity.” It also evaluates the extent to which the impact investing market presently meets those conditions. The Report identifies three factors that influence institutional investors’ ability to engage in impact investing, including market conditions, firms’ internal orientation toward impact investing and the external operating environment. This article summarizes the key takeaways from the Report. See our two-part series “Opportunities and Challenges in ESG and Impact Investing for Alternative Asset Managers and Investors”: Part One (Aug. 24, 2023); and Part Two (Sep. 7, 2023).

Recalibrating Securities Enforcement and Risk: What Fund Managers Should Know About the Shifting Legal Landscape

Growing judicial skepticism and changing ideology from the current SEC leadership have collectively resulted in a recalibration of securities enforcement proceedings and attendant risks. These developments have shifted the risk analysis for private fund managers that are subject to the SEC Divisions of Investment Management and Enforcement. Federal courts have contributed by revisiting foundational questions over the proper forum for civil actions, the role of juries in adjudicating fraud-based claims and constitutional limits on the Commission’s remedies and reach. Those developments follow more than a decade of heightened administrative enforcement activity – particularly after the 2008 financial crisis – and mark a shift toward greater judicial oversight and limitations on the mechanisms securities regulators use to pursue alleged misconduct. These changes have practical consequences for private fund managers subject to SEC regulatory oversight and enforcement. This guest article by Nelson Mullins partner Benjamin Lajoie discusses how these shifts impact the day-to-day risk calculus for decision-making; influence how regulators prioritize and structure an enforcement action; and, importantly, inform how a manager may best respond to an existing or potential enforcement action – whether through strategic response, settlement or litigation strategy in contested cases. See “What ‘Back to Basics’ Under Chair Atkins Means for SEC’s Division of Enforcement” (Feb. 5, 2026).

Norton Rose Fulbright Adds an Investment Funds Partner in New York

Richard Madris has joined Norton Rose Fulbright as a partner in its funds and asset management group in New York. He advises on fund formation and operations, as well as structuring fund investments for clients in the infrastructure, real estate, PE, private credit and renewables sectors. For insights from Norton Rose Fulbright, see “Governance and Succession Planning for Fund Managers” (Jan. 22, 2026); and “SEC Enforcement Action Raises Potential Materiality Threshold for Conflicts of Interest” (Jul. 24, 2025).

Most-Read Articles

Trailblazing Women – Contributions, Achievements and Observations of Outstanding Leaders

To mark International Women’s Day, Law Report Group editors, along with our colleagues across ION Analytics’ products, interviewed outstanding women in the industries and jurisdictions we cover. In this article, Jill Abitbol, Robin Barton, Rorie Norton and Megan Zwiebel profile notable women in the data privacy, cybersecurity, AI, private funds and anti-corruption law fields, including (i) Paula Howell Anderson, (ii) Gwendolyn Lee Hassan, (iii) Audrey Koh, (iv) Stacy Feuer, (v) Heather Egan, (vi) Jeewon Serrato, (vii) Stephanie Breslow, (viii) Anne Choe, (ix) Heather Wyckoff, (x) Angie Batterson, (xi) Jacqueline Eaves, and (xii) C. Dabney O’Riordan.

Enjoy reading their inspiring remarks here.