Institutional Investor Newsletter

1. SEC makes fund investments more accessible for closed-ended retail funds 

The US Securities and Exchange Commission (SEC)’s Division of Investment Management recently confirmed that it will no longer request retail closed-end funds to (1) limit investments in underlying private funds relying on Sections 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 to less than 15 percent of their assets or (2) limit their offers to investors who qualify as “accredited investors.” The guidance, published in August 2025, follows earlier comments by SEC Chair Paul Atkins that previewed the potential change. The SEC’s latest confirmation creates a significant new source of investment commitments for managers raising private funds. Further, this shift is expected to influence fund documentation and negotiations with traditional institutional investors – particularly regarding how investment opportunities are allocated and whether affiliated closed-end retail funds can participate as limited partners (LPs) or engage in co-investments outside the primary fund structure. Institutional investors are encouraged to assess amendments to existing fund documents and their terms related to new alternative asset investments, as well as consider the impact they will have on non-retail LPs.

2. LP-led GP stake and revenue share transactions continue to rise

Both new and established managers continue to pursue strategic partnerships with select institutional investors, in which the investor provides seed capital to launch a new platform or series of commingled funds. In return, the investor receives either a share of all fees and carried interest earned by the manager or general partner (GP) from those vehicles, or an actual ownership stake in the management entity. The specifics of each GP stake or revenue share partnership are highly bespoke, and there are unique legal, structural, and tax issues that arise in connection with these transactions. For guidance through GP stakes/revenue share transactions as the market for these arrangements continues to evolve, please contact Dan Fabian or your DLA Piper attorney.

3. Management fee offsets face increased SEC scrutiny

In August 2025, the SEC announced charges against a New York-based registered investment adviser for breaches of fiduciary duty regarding management fee calculation and offset practices for its private fund clients related to compensation received from portfolio companies. The SEC order found that the manager (1) failed to disclose interest received on deferred transaction fees that did not offset the management fee for the fund’s LPs and (2) improperly duplicated the dilution of transaction fee allocations when calculating certain fee offsets. The manager agreed to settle the charges by paying monetary relief and to conduct a distribution to harmed investors. Institutional investors are encouraged to review the case and, if appropriate, address related concerns when negotiating management fee offsets in their own future fund investments.

4. ILPA updates its Capital Call & Distribution Template

After seeing public comments in August 2025, the Institutional Limited Partners Association (ILPA) has updated its Capital Call & Distribution Template. ILPA first introduced the template in 2011 as a set of standardized best practices to improve LP/GP transparency and establish consistency in reporting. Since its initial release, the template has been widely used throughout the industry – LPs often request or require its use in connection with their alternative fund investments.