On October 29, 2026, Securities and Exchange Commission (SEC) staff issued a no-action letter in response to a request from a global asset manager. The SEC staff said it would not recommend enforcement action under Section 17(d) of the Investment Company Act of 1940 and Rule 17d-1 if a registered closed-end fund advised by the manager has an unaffiliated third party buy and hold its starting portfolio until the fund launches.
The manager also asked that the relief cover future registered closed-end funds and business development companies (BDCs) it or its affiliates advise. The SEC staff confirmed that the same position applies to them.
Why Warehousing Matters
Warehousing is a common approach for newly organized private credit funds. A lender or other unaffiliated third party acquires assets selected by the fund’s manager before the fund’s first close, and the fund buys those assets once it has capital. That lets the fund put investors’ money to work from launch without undue cash drag or other potential downsides.
While BDC sponsors have used warehouse facilities for years, those arrangements have had to be structured around the 1940 Act’s restrictions on transactions with affiliates. They also could not benefit from the co-investment exemptive orders that closed-end registered funds and BDCs typically obtain.
This most recent no-action letter is another example of the SEC staff taking steps to align the rules for registered retail alternative funds with established private markets practice, particularly for registered closed-end funds and BDCs offered as retail products that provide private market access.
The Warehousing Arrangement
Under the arrangement with respect to which the SEC staff provided no-action relief, the manager identifies investments for the fund, and an unaffiliated warehouse party decides whether to buy and hold them. Once the fund reaches its minimum offering amount and its board approves the purchase, the fund acquires the entire warehoused portfolio. The SEC staff’s position rests on the facts and representations in the manager’s request, including the following:
- The warehouse party is not affiliated with the fund or the manager and does not acquire investments from fund affiliates or from accounts managed by the manager’s affiliates. This unaffiliated structure is a key feature of the arrangement the SEC staff considered.
- The manager will select and present one or more investment opportunities to the warehouse party on the fund’s behalf, and the warehouse party has sole discretion to acquire them.
- The warehouse party cannot acquire any portfolio investment from a first- or second-tier affiliate of the fund.
- The fund must buy all of the warehoused investments at a price no higher than the warehouse party’s cost, adjusted for distributions received, financing fees and certain other amounts.
- The fund’s board approves the facility agreement and, before the purchase, finds the terms reasonable and fair and the purchase in the fund’s best interests.
- If the warehouse party invests alongside fund affiliates, the manager treats it as the fund under its existing co-investment exemptive order and must comply with that order’s conditions on allocating investment opportunities among affiliated participants, giving the board information before it approves, and handling dispositions and notifications.
- The fund’s offering materials disclose the warehoused investments, the material terms of the facility and the related risks and conflicts of interest.
Limits of the Relief
The relief has a targeted focus. It is limited to warehousing when a fund begins operations, and to funds relying on a co-investment order with conditions substantially identical to the manager’s order or to an order issued to another registered fund.
For a future BDC, the affiliation and sourcing restrictions are measured under Section 57 of the 1940 Act, which sets the affiliation rules for BDCs, rather than Section 17.
The SEC staff also expressly declined to give any assurance on compliance with Section 18 of the 1940 Act or Rule 18f-4, which may bear on the fund’s obligation to purchase the warehoused portfolio, or on the commitment by an affiliate of the manager to buy fund shares if needed to reach the minimum offering amount.
What This Means for Fund Sponsors
The letter offers a potential solution to a recurring launch challenge, assembling a private markets portfolio before investor capital is available.
Its value for sponsors lies not just in being able to use a warehouse, but in coordinating portfolio construction, fundraising and distribution through platforms and wealth channels, within regulatory requirements and with fund board approval as a safeguard.
These transactions are complex. The specific facts and structures in the manager’s request, and any regulatory issues the letter does not address, will need to be considered separately throughout a launch.
We are actively working with fund sponsors on warehousing and other launch structures for registered funds and BDCs, and we would be glad to discuss how this relief may apply to your products.
The Race for New Capital: Registered Funds for Private Fund Managers
Join our Registered Funds team on November 19 in New York for The Race for New Capital: Registered Funds for Private Fund Managers, a panel and reception at our 90 Park Avenue office featuring George Silfen, Martin Dozier and Derek Steingarten, along with guests from SS&C and CAIS.
If you have any questions, or would like additional information, please contact one of the attorneys on our Investment Funds team.
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