Amidst a proliferating wave of new and proposed regulations applicable to registered investment advisers, the ability to operate all or a portion of an investment management business without an obligation to register under the Investment Advisers Act of 1940 (Advisers Act) may look increasingly attractive. In particular, the proposed private fund adviser rules call into question many concepts and provisions that have been standard in the private funds world for years and represent a philosophical shift by the SEC in attempting to prohibit certain commercial terms, regardless of investor sophistication and the extent of disclosure by a fund manager. Despite the regulatory environment, most PE, private credit and hedge fund managers have no choice but to remain registered as investment advisers and abide by all corresponding regulations. Certain real estate-focused managers, however, may have the flexibility to not register under the Advisers Act. In addition, some multi-strategy investment managers that are already registered may have the ability to exclude their real estate business from Advisers Act requirements applicable to their other product lines. In a guest article, DLA Piper partners John D. Reiss, Bradley E. Phipps and Brooke R. Kerendian explore relevant considerations for stand-alone real estate managers determining whether to register under the Advisers Act, as well as for multi-strategy sponsors that wish to consider excluding their real estate business from Advisers Act requirements. For additional insights from Reiss, see “Launching a Real Estate Fund: Key Strategies, Structures and Terms (Part One of Two)
” (May 5, 2020).