March 02, 2010

Utilizing Predecessor Private Fund Performance in a Mutual Fund

Philadelphia partner Josh Deringer co-authored “Utilizing Predecessor Private Fund Performance in a Mutual Fund” for The Investment Lawyer with Brian F. McNally, general counsel and chief compliance officer of client Turner Investment Partners. The article addresses the continuation of a private investment fund as a registered investment vehicle such as a mutual fund, and the ability of the fund managers to use the predecessor fund’s performance results to market the “new” fund. Josh, a member of the Investment Management Group, and his co-author note the restrictive regulations surrounding predecessor performance and summarize the published guidance in the area, as well as the informal guidance provided by SEC staff. According to Josh and Brian, the most important factor in determining whether or not an the track record of the prior investment vehicle may be “tacked on” to the mutual fund is whether or not the private investment partnership was a “bona fide” offering. They conclude that the development of the “bona fide” requirement “may allow managers and sponsors greater flexibility in product development and planning.”

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