[Federal Register Volume 79, Number 97 (Tuesday, May 20, 2014)]
[Notices]
[Pages 28983-28985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-11571]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 31046; 812-14147]
Partners Group Private Equity (Master Fund), LLC and Partners
Group (USA) Inc.; Notice of Application
May 14, 2014.
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 of Application: Applicants request an order to permit
certain registered closed-end management investment companies to issue
multiple classes of limited liability company interests (``Interests'')
with sales loads and/or asset-based distribution and/or service fees
and contingent deferred sales loads (``CDSCs'').
Applicants: Partners Group Private Equity (Master Fund), LLC (the
``Fund'') and Partners Group (USA) Inc. (the ``Adviser'') (together,
the ``Applicants'').
Filing Dates: The application was filed on April 10, 2013 and
amended on June 10, 2013, September 18, 2013, and April 28, 2014.
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 should be received by the Commission by 5:30 p.m.
on June 9, 2014, 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: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090; Applicants, c/o Brooks Lindberg,
Esq., Partners Group (USA) Inc., 1114 Avenue of the Americas, 37th
Floor, New York, New York 10036.
FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876 or Daniele Marchesani, at (202) 551-6821 (Division of
Investment Management, Chief Counsel's Office).
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.html or
by calling (202) 551-8090.
Applicants' Representations
1. The Fund is a continuously offered closed-end management
investment company registered under the Act and organized as a Delaware
limited liability company.\1\ The Adviser, a Delaware corporation, is
registered with the Commission as an investment adviser under the
Investment Advisers Act of 1940, as amended (the ``Advisers Act'').
Foreside Fund Services, LLC, a registered broker-dealer under the
Securities Exchange Act of 1934, as amended (``1934 Act''), currently
acts as a placement agent for the Fund. Foreside Fund Services, LLC and
any future placement agent or distributor of the Fund (the ``Placement
Agent'') will be unaffiliated with the Adviser.
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\1\ The Fund currently serves as the master fund in a master-
feeder structure operating in accordance with section 12(d)(1)(E) of
the Act with four feeder funds. If the requested relief is granted
and Members (as defined below) of the Fund approve the
reorganization of the feeder funds into the Fund, the feeder funds
will be dissolved and the Fund will no longer operate within a
master-feeder structure. If the feeder funds are not dissolved,
applicants will not rely on the requested relief.
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2. The Fund continuously offers Interests \2\ in private placements
in reliance on the provisions of Regulation D under the Securities Act
of 1933, as amended (``Securities Act'').\3\ Interests of the Fund are
not listed on any securities exchange and do not trade on an over-the-
counter system such as NASDAQ. Applicants do not currently expect that
a substantial and regular secondary market for the Interests will
develop.
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\2\ ``Interests'' includes any other equivalent designation of a
proportionate ownership interest (such as shares or units) of the
Fund (or any other registered closed-end management investment
company relying on the requested order).
\3\ Interests of the Fund are only sold to ``accredited
investors,'' as defined in Regulation D under the Securities Act,
and ``qualified clients,'' as defined in the Adviser's Act. The Fund
reserves the right to conduct a public offering of the Interests
under the Securities Act in the future.
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3. The Fund currently issues a single class of Interests (the
``Initial Class''). Interests in the Initial Class are not currently
subject to a sales load or distribution and/or service fees. If the
requested relief is granted, the Fund intends to redesignate its
Initial Class as the ``Service Class.'' Additionally, if the requested
relief is granted, the Fund currently intends to continuously offer at
least one additional class of Interests, ``Institutional Class,'' with
each class having its own fee and expense structure. For the Service
Class and Institutional Class, the Placement Agent may charge a front-
end sales load. Any waiver of, scheduled variation in, or elimination
of, the sales load will comply with the requirements of rule 22d-1
under the Act as if that rule applied to closed-end management
investment companies. Each class may (but would not necessarily) be
subject to asset-based distribution and/or service fees.
4. In order to provide a limited degree of liquidity to members
(``Members''), the Fund may from time to time offer to repurchase
Interests at their then current net asset value pursuant to rule 13e-4
under the 1934 Act pursuant to written tenders by Members.\4\
Repurchases will be made at such times, in such amounts and on such
terms as may be determined by the Fund's board of managers (the
``Board''), in its sole discretion. The Adviser expects to
[[Page 28984]]
ordinarily recommend that the Board authorize the Fund to offer to
repurchase Interests from Members quarterly.
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\4\ Service Class and Institutional Class Interests will be
subject to an early repurchase fee at a rate of 2% of the aggregate
net asset value of the Member's Interest repurchased by the Fund
(the ``Early Repurchase Fee'') if the interval between the date of
purchase of the Interests and the valuation date with respect to the
repurchase of the Interest is less than one year. The Early
Repurchase Fee will equally apply to all classes of Interests of the
Fund, consistent with section 18 of the Act and rule 18f-3
thereunder. To the extent the Fund determines to waive, impose
scheduled variations of, or eliminate the Early Repurchase Fee, it
will do so consistently with the requirements of rule 22d-1 under
the Act and the Fund's waiver of, scheduled variation in, or
elimination of, the Early Repurchase Fee will apply uniformly to all
classes of shares of the Fund.
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5. The 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 or any
entity controlling, controlled by, or under common control (as the term
``control'' is defined in section 2(a)(9) of the Act) with the Adviser
acts as investment adviser, and which provides periodic liquidity with
respect to its Interests pursuant to rule 13e-4 under the 1934 Act.\5\
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\5\ Any Fund relying on this relief will do so in a manner
consistent with the terms and conditions of the application.
Applicants represent that each investment company presently
intending to rely on the order requested in the application is
listed as an applicant.
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6. Applicants represent that any asset-based service and
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'').\6\ Applicants also represent that
the Fund will disclose in each private placement memorandum the fees,
expenses and other characteristics of each class of Interests offered
for sale by that private placement memorandum, as is required for open-
end, multiple class funds under Form N-1A. The Fund will disclose fund
expenses borne by Members as if it were an open-end management
investment company during the reporting period in Member reports and
describe in its private placement memorandum any arrangements that
result in breakpoints in, or elimination of, sales loads with respect
to each class of Interests offered for sale by that prospectus.\7\ The
Fund or Placement Agent will also comply with any requirement 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 private placement memorandum disclosure
of sales loads and revenue sharing arrangements as if those
requirements applied to the Fund and the Placement Agent.\8\ In
addition, Applicants will comply with applicable enhanced fee
disclosure requirements for fund of funds, including registered funds
of hedge funds.\9\
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\6\ All references to NASD Conduct Rule 2830 include any
successor or replacement rule that may be adopted by FINRA.
\7\ See Shareholder Reports and Quarterly Portfolio Disclosure
of Registered Management Investment Companies, Investment Company
Act Release No. 26372 (Feb. 27, 2004) (adopting release); and
Disclosure of Breakpoint Discounts by Mutual Funds, Investment
Company Act Release No. 26464 (June 7, 2004) (adopting release).
\8\ See Confirmation Requirements and Point of Sale Disclosure
Requirements for Transactions in 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).
\9\ Fund of Funds Investments, Investment Company Act Rel. Nos.
26198 (Oct. 1, 2003) (proposing release) an 27399 (Jun. 20, 2006)
(adopting release). See also Rules 12d1-1, et seq. of the Act.
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7. All expenses incurred by the Fund will be allocated among its
various classes of Interests based on the respective net assets of the
Fund attributable to each such class, except that the net asset value
and expenses of each class will reflect the expenses associated
particularly with the distribution and service plan, Member servicing
fees (including transfer agency fees) and any other incremental expense
particular to each class. Expenses of the Fund allocated to a
particular class of the Fund's Interest will be borne on a pro rata
basis by each outstanding Interest of that class. The Fund will comply
with the provisions of rule 18f-3 as if it were an open-end investment
company.
8. Although the Fund does not currently intend to impose CDSCs, the
Fund will only impose a CDSC in compliance with rule 6c-10 as if that
rule applied to closed-end management investment companies. Applicants
further state that, in the event it imposes CDSCs, the Fund will apply
the CDSCs (and any waivers or scheduled variations of the CDSCs)
uniformly to all Members of a given class and consistently with the
requirements of rule 22d-1 under the Act.
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 Interests of the Funds may be prohibited by section
18(c) of the Act.
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 Interests
of the Funds 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. Pursuant to section 6(c) of the Act, the Commission may, by
order on application, conditionally or unconditionally exempt any
person, security, or transaction, or any class or classes of persons,
securities, or transactions, from any provision or provisions of the
Act or from any rule or regulation under the Act, if and to the extent
that the 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
exemptive relief under section 6(c) from sections 18(c) and 18(i) to
permit the Funds to issue multiple classes of Interests.
4. Applicants also believe that the proposed allocation of expenses
relating to distribution and voting rights is equitable and will not
discriminate against any group or class of Members. Applicants submit
that the proposed arrangements would permit the Fund to facilitate the
distribution of Interests and provide investors with a broader choice
of Member options. Applicants believe that the proposed multiple class
system does not raise the concerns underlying section 18 of the Act to
any greater degree than open-end investment companies' multiple class
structures. Applicants believe that the rationale for and the
conditions contained in rule 18f-3 are as applicable to a closed-end
investment company seeking to offer multiple classes of Interests with
varying distribution and service arrangements in a single portfolio as
they are to open-end investment companies. Applicants state that the
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 although the Fund does not currently intend to
impose CDSCs, the Fund will only impose a CDSC in compliance with rule
6c-10 as if that rule applied to closed-end management investment
companies. The Fund would also make required disclosures in accordance
with the requirements of Form N-1A concerning CDSCs as if the Fund were
an open-end
[[Page 28985]]
investment company. Applicants further state that, in the event it
imposes CDSCs, the Fund will apply the CDSCs (and any waivers or
scheduled variations of the CDSCs) uniformly to all Members of a given
class and consistently with the requirements of rule 22d-1 under the
Act. Finally, to the extent the Fund determines to waive, impose
scheduled variations of, or eliminate the Early Repurchase Fee, it will
do so consistently with the requirements of Rule 22d-1 under the 1940
Act and the Fund's waiver of, scheduled variation in, or elimination
of, the Early Repurchase Fee will apply uniformly to all classes of
shares of the Fund.
Asset-based Service and 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 pursuant to Section 17(d) of the Act and
Rule 17d-1 thereunder to the extent necessary for the Fund to pay
asset-based distribution and/or service 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
Applicants agree 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 NASD Conduct Rule 2830, as amended from
time to time or replaced, 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. 2014-11571 Filed 5-19-14; 8:45 am]
BILLING CODE 8011-01-P