Many advisers of registered products, including mutual funds and closed-end interval funds, invest in private alternative investments as part of their portfolio strategy. And generally, they are permitted by the Investment Advisers Act of 1940 to do so. While mutual funds are restricted to investing up to 15% of net assets in illiquid securities, there are no such restrictions for interval funds.Read More
As many portfolio managers look to launch alternative investment strategies, we have seen a growing interest in the interval fund structure. An interval fund is a hybrid of an open-end mutual fund and a closed-end mutual fund. Similar to an open-end fund, an interval fund accepts subscription dollars and issues shares at net asset value on a regular basis, often daily. However, they generally only offer to repurchase shares at net asset value quarterly. These infrequent repurchases allow interval funds to hold less liquid assets compared to traditional open-end mutual funds.Read More
Fulcrum fee arrangements have been used by certain actively traded registered funds for years but are of late garnering increased attention as active managers attempt to stave off passive investing and the lower fee structure often associated with it. The concept aligns the interest of the advisor with that of the investor by rewarding the advisor when it outperforms its benchmark and reducing the fees of the advisor (to that of an index fund-like fee or even zero) when it underperforms its benchmark.Read More
The Coronavirus pandemic (“COVID-19”) is causing significant financial and operating hardships across all industries. Any companies that are currently preparing GAAP financial statements, including investment companies, should consider whether or not the impact of COVID-19 represents a significant event as defined in FASB Accounting Standards Codification (“FASB ASC”) 855, Subsequent Events.Read More
On December 30, 2019, the SEC proposed amendments to certain independence requirements with the goal of further aligning the auditor’s independence analysis with Rule 2-01’s “reasonable investor” concept. The concept asks us to consider whether a reasonable investor with knowledge of all the relevant facts and circumstances would conclude that the auditor is capable of exercising objective and impartial judgment?Read More
In June 2019, the SEC issued amendments to Rule 2-01 of Regulation S-X (“the Loan Rule”). The amendments now more effectively identify whether independence may be impaired with respect to an audit client when the audit firm or its covered members have a lending relationship with certain shareholders of that audit client.Read More
May 2020 Update: As a result of the COVID-19 pandemic, in May 2020 the Auditing Standards Board issued new guidance providing for a one-year delay to the effective date of SAS No. 134, which will now be effective for audits of financial statements ending on or after December 15, 2021 and also allows for early implementation.
Non-public entities, including private funds and investment advisors, will likely see changes to Auditor’s Reports, or the Opinion, included beginning with December 2020 audited financial statements.