[Federal Register Volume 77, Number 231 (Friday, November 30, 2012)]
[Notices]
[Pages 71462-71464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28951]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 30280; 812-14026]
Blackstone Alternative Alpha Fund, et al.; Notice of Application
November 26, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice of an application under section 6(c) of the Investment
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c)
and 18(i) of the Act and for an order pursuant to section 17(d) of the
Act and rule 17d-1 under the Act.
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SUMMARY: Summary of Application: Applicants request an order to permit
certain registered closed-end management investment companies to issue
multiple classes of shares of beneficial interest (``Shares'') and to
impose asset-based service and/or distribution fees and contingent
deferred sales loads (``CDSCs'').
Applicants: Blackstone Alternative Alpha Fund (the ``Feeder Fund''),
Blackstone Alternative Alpha Master Fund (the ``Master Fund''),
Blackstone Alternative Asset Management L.P. (the ``Adviser'') and
Blackstone Advisory Partners L.P. (the ``Distributor'').
DATES: Filing Dates: The application was filed on April 13, 2012, and
amended on September 19, 2012.
Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests
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should be received by the Commission by 5:30 p.m. on December 24, 2012,
and should be accompanied by proof of service on the applicants, in the
form of an affidavit, or, for lawyers, a certificate of service.
Hearing requests should state the nature of the writer's interest, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
Commission's Secretary.
ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants, c/
o Peter Koffler, Esq., Blackstone Alternative Asset Management L.P.,
345 Park Avenue, 28th Floor, New York, NY 10154.
FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at
(202) 551-6915 or Daniele Marchesani, Branch Chief, at (202) 551-6821
(Division of Investment Management, Office of Investment Company
Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site by searching for the file number, or an applicant
using the Company name box, at http://www.sec.gov/search/search.htm or
by calling (202) 551-8090.
Applicants' Representations
1. The Feeder Fund and the Master Fund are continuously offered
non-diversified closed-end management investment companies registered
under the Act and organized as Massachusetts business trusts. The
Feeder Fund operates as a feeder fund in a master-feeder structure and
intends to invest substantially all of its assets in the Master Fund.
The Master Fund invests in non-traditional or ``alternative''
strategies which may include investment funds commonly referred to as
``hedge funds.''
2. The Adviser, a Delaware limited partnership and wholly owned
subsidiary of The Blackstone Group L.P., is registered as an investment
adviser under the Investment Advisers Act of 1940 and serves as
investment adviser to the Feeder Fund and the Master Fund. The
Distributor, a broker-dealer registered under the Securities Exchange
Act of 1934 (``1934 Act''), acts as the principal underwriter of the
Feeder Fund. The Distributor is under common control with the Adviser
and is an affiliated person, as defined in section 2(a)(3) of the Act,
of the Adviser.
3. The Feeder Fund continuously offers its Shares \1\ to the public
under the Securities Act of 1933, as amended (the ``Securities Act'').
Shares of the Feeder Fund are not listed on any securities exchange and
do not trade on an over-the-counter system such as Nasdaq. Applicants
do not expect that any secondary market will develop for the Shares.
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\1\ ``Shares'' includes any other equivalent designation of a
proportionate ownership interest of the Feeder Fund (or any other
registered closed-end management investment company relying on the
requested order).
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4. The Feeder Fund currently offers a single class of Shares (the
``Initial Class'') at net asset value per share subject to a sales load
and annual asset-based service and distribution fee and proposes to
issue multiple classes of Shares. The Feeder Fund proposes to offer a
new Share class (the ``New Class'') at net asset value that may (but
would not necessarily) be subject to a front-end sales load and an
annual asset-based service and/or distribution fee. The Feeder Fund
intends to continue to offer Initial Class Shares, subject to a sales
load, a service and/or distribution fee, and minimum purchase
requirements.
5. In order to provide a limited degree of liquidity to
shareholders, the Feeder Fund may from time to time offer to repurchase
Shares at their then current net asset value in accordance with rule
13e-4 under the 1934 Act pursuant to written tenders by
shareholders.\2\ Repurchases will be made at such times, in such
amounts and on such terms as may be determined by the Feeder Fund's
board of trustees (``Board''), in its sole discretion.\3\ The Adviser
expects to ordinarily recommend that the Board authorize the Feeder
Fund to offer to repurchase Shares from shareholders quarterly.
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\2\ Likewise, the Master Fund's repurchase offers are conducted
pursuant to rule 13e-4 under the 1934 Act.
\3\ Shares are subject to an early withdrawal fee at a rate of
2% of the aggregate net asset value of the shareholder's Shares
repurchased by the Feeder Fund (the ``Early Withdrawal Fee'') if the
interval between the date of purchase of the Shares and the
valuation date with respect to the repurchase of those Shares is
less than one year. The Early Withdrawal Fee will equally apply to
all shareholders of the Feeder Fund, regardless of class, consistent
with section 18 of the Act and rule 18f-3 under the Act. To the
extent the Feeder Fund determines to waive, impose scheduled
variations of, or eliminate the Early Withdrawal Fee, it will do so
consistently with the requirements of rule 22d-1 under the Act and
apply uniformly to all shareholders of the Feeder Fund.
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6. Applicants request that the order also apply to any other
continuously offered registered closed-end management investment
company existing now or in the future for which the Adviser, the
Distributor, or any entity controlling, controlled by, or under common
control with the Adviser or the Distributor acts as investment adviser
or principal underwriter, and which provides periodic liquidity with
respect to its Shares through tender offers conducted in compliance
with rule 13e-4 under the 1934 Act.\4\
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\4\ The Feeder Fund and any other investment company relying on
the requested relief will do so in a manner consistent with the
terms and conditions of the application. Applicants represent that
any person presently intending to rely on the requested relief is
listed as an applicant.
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7. Applicants represent that any asset-based service and/or
distribution fees will comply with the provisions of rule 2830(d) of
the Conduct Rules of the National Association of Securities Dealers,
Inc. (``NASD Conduct Rule 2830'') as if that rule applied to the Feeder
Fund.\5\ Applicants also represent that the Feeder Fund will disclose
in its prospectus, the fees, expenses and other characteristics of each
class of Shares offered for sale by the prospectus as is required for
open-end multiple class funds under Form N-1A. As is required for open-
end funds, the Feeder Fund will disclose its expenses in shareholder
reports, and disclose any arrangements that result in breakpoints in or
elimination of sales loads in its prospectus.\6\ The Feeder Fund and
the Distributor will also comply with any requirements that may be
adopted by the Commission or FINRA regarding disclosure at the point of
sale and in transaction confirmations about the costs and conflicts of
interest arising out of the distribution of open-end investment company
shares, and regarding prospectus disclosure of sales loads and revenue
sharing arrangements as if those requirements applied to the Feeder
Fund and the Distributor.\7\
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\5\ All references to NASD Conduct Rule 2830 include any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority (``FINRA'').
\6\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring
open-end investment companies to disclose fund expenses in
shareholder reports); and Disclosure of Breakpoint Discounts by
Mutual Funds, Investment Company Act Release No. 26464 (June 7,
2004) (adopting release) (requiring open-end investment companies to
provide prospectus disclosure of certain sales load information).
\7\ See, e.g., Confirmation Requirements and Point of Sale
Disclosure Requirements for Transactions and Certain Mutual Funds
and Other Securities, and Other Confirmation Requirement Amendments,
and Amendments to the Registration Form for Mutual Funds, Investment
Company Act Release No. 26341 (Jan. 29, 2004) (proposing release).
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8. The Feeder Fund will allocate all expenses incurred by it among
the various classes of Shares based on the net assets of the Feeder
Fund
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attributable to each class, except that the net asset value and
expenses of each class will reflect distribution fees, service fees,
and any other incremental expenses of that class. Expenses of a Feeder
Fund allocated to a particular class of Shares will be borne on a pro
rata basis by each outstanding Share of that class. Applicants state
that the Feeder Fund will comply with the provisions of rule 18f-3
under the Act as if it were an open-end investment company.
9. In the event the Feeder Fund imposes a CDSC, the applicants will
comply with the provisions of rule 6c-10 under the Act, as if that rule
applied to closed-end management investment companies. With respect to
any waiver of, scheduled variation in, or elimination of the CDSC, the
Feeder Fund will comply with rule 22d-1 under the Act as if the Feeder
Fund were an open-end investment company.
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(c) of the Act provides, in relevant part, that a
closed-end investment company may not issue or sell any senior security
if, immediately thereafter, the company has outstanding more than one
class of senior security. Applicants state that the creation of
multiple classes of Shares of the Feeder Fund may be prohibited by
section 18(c).
2. Section 18(i) of the Act provides that each share of stock
issued by a registered management investment company will be a voting
stock and have equal voting rights with every other outstanding voting
stock. Applicants state that permitting multiple classes of Shares of
the Feeder Fund may violate section 18(i) of the Act because each class
would be entitled to exclusive voting rights with respect to matters
solely related to that class.
3. Section 6(c) of the Act provides that the Commission may exempt
any person, security or transaction or any class or classes of persons,
securities or transactions from any provision of the Act, or from any
rule under the Act, if and to the extent such exemption is necessary or
appropriate in the public interest and consistent with the protection
of investors and the purposes fairly intended by the policy and
provisions of the Act. Applicants request an exemption under section
6(c) from sections 18(c) and 18(i) to permit the Feeder Fund to issue
multiple classes of Shares.\8\
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\8\ The Master Fund will not issue multiple classes of its
shares and is an applicant because of the master-feeder structure.
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4. Applicants submit that the proposed allocation of expenses and
voting rights among multiple classes is equitable and will not
discriminate against any group or class of shareholders. Applicants
submit that the proposed arrangements would permit the Feeder Fund to
facilitate the distribution of its Shares and provide investors with a
broader choice of shareholder options. Applicants assert that the
proposed closed-end investment company multiple class structure does
not raise the concerns underlying section 18 of the Act to any greater
degree than open-end investment companies' multiple class structures
that are permitted by rule 18f-3 under the Act. Applicants state that
the Feeder Fund will comply with the provisions of rule 18f-3 as if it
were an open-end investment company.
CDSCs
1. Applicants believe that the requested relief meets the standards
of section 6(c) of the Act. Rule 6c-10 under the Act permits open-end
investment companies to impose CDSCs, subject to certain conditions.
Applicants state that any CDSC imposed by the Feeder Fund will comply
with rule 6c-10 under the Act as if the rule were applicable to closed-
end investment companies. The Feeder Fund also will disclose CDSCs in
accordance with the requirements of Form N-1A concerning CDSCs as if
the Feeder Fund were an open-end investment company. Applicants further
state that the Feeder Fund will apply the CDSC (and any waivers or
scheduled variations of the CDSC) uniformly to all shareholders in a
given class and consistently with the requirements of rule 22d-1 under
the Act.
Asset-Based Service and/or Distribution Fees
1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit
an affiliated person of a registered investment company or an
affiliated person of such person, acting as principal, from
participating in or effecting any transaction in connection with any
joint enterprise or joint arrangement in which the investment company
participates unless the Commission issues an order permitting the
transaction. In reviewing applications submitted under section 17(d)
and rule 17d-1, the Commission considers whether the participation of
the investment company in a joint enterprise or joint arrangement is
consistent with the provisions, policies and purposes of the Act, and
the extent to which the participation is on a basis different from or
less advantageous than that of other participants.
2. Rule 17d-3 under the Act provides an exemption from section
17(d) and rule 17d-1 to permit open-end investment companies to enter
into distribution arrangements pursuant to rule 12b-1 under the Act.
Applicants request an order under section 17(d) and rule 17d-1 under
the Act to permit the Feeder Fund to impose asset-based service and/or
distribution fees. Applicants have agreed to comply with rules 12b-1
and 17d-3 as if those rules applied to closed-end investment companies.
Applicants' Condition
The Feeder Fund agrees that any order granting the requested relief
will be subject to the following condition:
Applicants will comply with the provisions of rules 6c-10, 12b-1,
17d-3, 18f-3 and 22d-1 under the Act, as amended from time to time, or
replaced as if those rules applied to closed-end management investment
companies, and will comply with the NASD Conduct Rule 2830, as amended
from time to time, as if that rule applied to all closed-end management
investment companies.
For the Commission, by the Division of Investment Management,
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28951 Filed 11-29-12; 8:45 am]
BILLING CODE 8011-01-P