Registered Funds Alert

September 2017

Table of Contents
SEC Taking Steps Toward
Fiduciary Rule2

SEC Chairman Jay Clayton announced inJune that the SEC is seeking public comments
regarding possible standards of conduct forinvestment advisers and broker-dealers–apreliminary step in restarting the SEC’s
consideration of a fiduciary rule that would
establish a uniform standard of conduct.
Click here for more

The SEC’s Expanded Confidential
Filing Review Process Should Include
Investment Companies (and BDCs)

3

The Division of Corporation Finance recently
expanded its confidential review process for
public offerings. The Division of Investment
Management should adopt a similar practicefor investment companies and BDCs.
Click here for more

European Union Reforms Could
5
Disrupt U.S. Soft Dollar Practices;
Industry Anxiously Waiting for the SEC
to ActMiFID II will ban the very common practiceof an investment adviser using bundled client
trading commissions to pay for securities
research. The unbundled approach permitted
by MiFID II does not align with the current
U.S. regulatory regime and SEC guidanceis needed address the issues this raises for
global asset managers. Click here for more
SEC Focus on BDCs Appears to be
6
Increasing: OCIE Issues Examination
Requests to Investment Advisers of BDCs
OCIE recently initiated several examinationsof BDC advisers. This indicates that the SEC’s
interest in BDCs may be increasing.
Click here for more

Notable Transactions: Q2 2017

the SEC’s latest steps toward a uniform fiduciary rule; the argument for8

A list of notable transactions that occurredin the second quarter of 2017, including M&A
transactions and closed-end fund initial public
offerings. Click here for more
Simpson Thacher & Bartlett LLP

The latest edition of Simpson Thacher’s Registered Funds Alert discusses:
the SEC to expand confidential filing reviews to registered funds; issues
arising under a new European Union reform that impacts soft dollar
practices in the U.S.; and the possibility that the SEC is becoming more
focused on BDCs.

SEC Taking Steps Toward
Fiduciary Rule
Securities and Exchange Commission (“SEC”)
Chairman Jay Clayton announced in June that
the SEC is seeking comment from the publicregarding standards of conduct for investment
advisers and broker-dealers. The call for comments
is a preliminary step in restarting the SEC’s
consideration of a fiduciary rule that would establish
a uniform standard of conduct for investment
advisers and broker-dealers. It also indicates a neweffort to revisit the fiduciary regulations adopted by
the Department of Labor (“DOL”) and coordinate
better the regulatory agencies’ requirements for
conduct by market participants.
If done correctly, adopting an enhanced conduct
standards rule, in particular for broker-dealers,
could better protect investors and enable greater
access to affordable financial advice. It certainly
would be a signature accomplishment for Chairman
Clayton. If done incorrectly, as has been the casewith the DOL’s fiduciary rule, implementing an overly
burdensome fiduciary rule could dampen innovationand the industry’s growth, hurting investors andservice providers alike.
The Dodd-Frank Act granted the SEC the authority
to promulgate a unified investment advice rule,and though the SEC requested comments from thepublic in 2013 on such an initiative, the rule-making
process has never proceeded beyond preliminary
stages.
There were significant developments since 2013,of course, that may have finally pushed the SEC totake action. The DOL has now finalized and partiallyenacted its own fiduciary rule that requires financial
advisers to act in the best interest of their clientsin commission-based retirement accounts and tooperate under a “best interest contract exemption”
that creates private rights of action, including classactions. The DOL rule went into effect on June 9th,albeit without enforcement, as the implementationof its enforcement provisions has been proposed to
be postponed until July 1, 2019 to facilitate further
review called for by President Trump. Still, its
current applicability and impending enforcement
have further underscored the need for strong action
from the SEC in this arena.
Chairman Clayton’s call for comments lists
seventeen topics that commenters may address,
some of which include specific requests for viewson whether the definitions of “investment advice”
and “retail investor” should be modified, as well as

how regulations might be crafted to address retailinvestor confusion about the standard of conductand category of professional or firm providing them
advice. Chairman Clayton said that he intends for the
SEC to collaborate closely with the DOL in drafting
its own rule. This particular call for comments is lessformal than the statutory comment period that will
precede the adoption of a rule, but offers interested
parties a chance to help shape the policy discussion
from the start. The rulemaking process is expected
to be long, and a final rule is, on an optimistic
timeline, years away.
The million-dollar question, though, is what theuniform standard might look like when the process iscomplete. In answering that question, the perceived
problems with the current, dual-standard system
may inform the types of reforms that are likely tobe proposed.
In 2008, the SEC commissioned the RAND Institutefor Civil Justice to conduct a study of investor
and industry understanding of the businesses ofinvestment advisers and broker-dealers. In the
study, investors were asked to distinguish between
the products, service, duties, and obligations ofinvestment advisers relative to those of brokerdealers, and it was apparent from the responses thatinvestors overwhelmingly do not appreciate that
there is a meaningful difference between the two.
The study also found that investors were commonly
unaware of their rights and failed to grasp thesignificance of conflicts of interest disclosed to them.
Furthermore, financial service providers were also
found to be unclear about the duties and obligations
they owe investors.
The general confusion found in the RAND study
is understandable given the complicated statutory
regime regulating the two types of service providers.
While the Investment Advisers Act of 1940 (the“Advisers Act”) imposes a “fiduciary” standard on
investment advisers, meaning that the investment
advisers must act in the best interest of theircustomers, the statutory language explicitly exempts
broker-dealers from the same requirement. Brokerdealers are instead subject to a lower “suitability”
standard under the Securities Exchange Act of 1934
(the “Exchange Act”). This requires that brokerdealers merely make investment recommendations
that fall within the range of what is “suitable” in lightof a customer’s stated investment goals and overall
financial situation, a notably less onerous standard
than the fiduciary standard for investment advisers.
There are two substantive differences between
these standards. First, each standard allows fora different range of investment advice that is
appropriate for a given customer. Both investment2

advisers and broker-dealers are required to collect“know your customer” information, which focuseson the customer’s financial situation and investment
objectives. This information then forms the basis forinvestment advice. Under a fiduciary standard, there
is only one acceptable recommendation; the one thatserves the customer’s best interest. The suitability
standard differs in that it allows for a range ofpossible recommendations, as even though only one
recommendation can be the “best” alternative, awhole host of recommendations, some worse thanothers, will be “suitable.”
Second, the fiduciary and suitability standards
require different amounts of disclosure with respect
to conflicts of interest that might bias investment
advice. Fiduciaries are required to disclose allmaterial facts and conflicts of interest that may
influence their advice, but under the lesser suitability
standard, broker-dealers are not required to disclose
all conflicts of interest when they recommend an
investment. The practical result is that if there
are multiple suitable options for a client, a brokerdealer need not recommend the “best” option,and instead can recommend whichever “suitable”
option is most profitable to the broker-dealer.
Further, the broker-dealer is not required to disclose
fully the conflicts of interest underlying a profitmaximizing recommendation.
The fact that the fiduciary standard for investment
advisers is principles-based also adds some
confusion, at least if applied to broker-dealers. The
Advisers Act does not explicitly state duties andobligations that arise under a fiduciary standard.
Instead, common law principles dictate the extent
of an investment adviser’s obligations to its client.
This results in those standards occasionally being
unnecessarily mysterious to investors and financial
service providers alike.
A uniform standard of conduct would remedy
much of the confusion simply by making everyone
who is providing investment advice subject to thesame rules. Investors likely would have a clearer
understanding of their rights and financial service
providers would have a more complete picture of theduties and obligations they owe to their customers.
The SEC may also codify many of the well accepted
common law principles that investment advisers
abide by. For example, the rule might state that:• Fiduciaries have an affirmative duty to disclose
all material facts related to conflicts of interest
that might influence the investment advice being
provided;• Fiduciaries have an affirmative duty to employ
reasonable care to avoid misleading clients; and/or
• Fiduciaries are prohibited from imposing a
fee when a customer terminates the advisory
relationship.
The SEC may also consider codifying some
additional principles to address the broader problem
of investors being unable to understand andevaluate conflicts of interest. For example, the rulemight state:• Fiduciaries have an affirmative duty to explain
investment risks to the customer;• Fiduciaries have an affirmative duty to explain
whether and why certain investment risks
are appropriate based on that customer’s
circumstances; and/or• Fiduciaries have an affirmative duty to test
customer comprehension of investment risks andconflicts of interest.
Adding explicit affirmative duties such as these
to a uniform standard of conduct rule may beparticularly attractive to the SEC but create somenew risks for market participants. This is because
they would create new avenues for enforcement
through which the SEC may curtail practices the SEC
alleges to be abusive. Under the current regulatory
regime, virtually every enforcement action related
to fraudulent practices is predicated on an error,
omission, or misstatement with respect to disclosure.
There is a serious question among some of the SEC
staff as to whether disclosure-based enforcement isserving investors effectively, and the SEC may takethis opportunity to change that paradigm.

The SEC’s Expanded
Confidential Filing Review
Process Should Include
Investment Companies(and BDCs)
As noted in a recent Alert, earlier this summer the
SEC expanded the range of issuers who can avail
themselves of a confidential filing review process sothat any issuer filing with the Division of Corporation
Finance is entitled to confidential review by the SECof the registration statement for an initial public
offering, spin-off or follow-on offering. Notably,
the SEC’s announcement does not appear to apply
3should be able to qualify as EGCs, which suggeststhat the SEC did not have a specific view onwhether investment companies should be able tofile confidentially. As the SEC is no longer limiting
confidential filings to EGCs, there is no obvious
rationale for continuing to exclude investmentcompanies and non-EGC BDCs from this process,especially when they would benefit from confidential
review in a similar manner as other issuers.

to filings made with the Division of Investment
Management. As registered investment companies
do not file with the Division of Corporation Finance,
it appears that they cannot utilize the expanded
confidential review process. In this Alert, wesuggest that investment companies and businessdevelopment companies (“BDCs”) be granted asimilar confidential review process for registration
statements related to new offerings, and that theDivision of Investment Management also accept
confidential submissions of exemptive applications
tied to such offerings. Extending confidential review
to investment companies would further the statedpolicy goal of SEC Chairman Jay Clayton to facilitate
capital formation.
Some BDCs Already Can Utilize the Confidential
Review Process
When Congress enacted the Jumpstart Our BusinessStartups Act (“JOBS Act”) in 2012, it allowed“emerging growth companies” (“EGCs”) to submit
registration statements, and related revisions,on a nonpublic basis for confidential SEC review.
The opportunity to obtain non-public SEC review
quickly became one of the most popular capitalaccess modifications in the JOBS Act. Prior to the
SEC’s recent announcement, the confidential review
process was limited to EGCs. The SEC has issued
guidance that investment companies do not qualify
as EGCs, but BDCs may qualify as EGCs provided
they meet general EGC criteria, including having lessthan $1.07 billion in annual revenue. In determiningthat investment companies could not qualify as
EGCs, the SEC focused on the fact that investmentcompanies have different disclosure requirements
than typical EGCs. BDCs, on the other hand, aresubject to similar disclosure requirements under
the Exchange Act as other issuers submitting filings
with the Division of Corporation Finance, which
supported the SEC’s determination that BDCs could
qualify as EGCs.
The SEC did not cite the confidential review process
in considering whether investment companies

The Division of Investment Management Should
Review Certain Exemptive Applications on a
Confidential BasisIf the Division of Investment Management expands
the confidential review process of registration
statements to investment companies and BDCs, it
should similarly allow for confidential review of
exemptive applications related to the same offering.
Akin to other issuers, the registration statements
of investment companies and BDCs can containsensitive information about the issuer or its sponsor,
and the prospect of immediate public disclosureof an offering can discourage an issuer from goingto market or delay an offering. In some cases, thesuccess and/or day-to-day operations of a new
product or offering will require exemptive relief
from the SEC, and the application for such relief
could contain similar sensitive information. Given
the amount of time that it can take to navigate
the exemptive application process and receive an
exemptive order, an exemptive application might
be filed contemporaneously with a registration
statement (for example, for co-investment relief).
If the exemptive application does not receive
confidential treatment, it could defeat the purposeof reviewing the registration statement on aconfidential basis.
The Division of Investment Management Should
Follow the Example of the Division of Corporation
Finance
It is a logical step for the Division of Investment
Management to follow the Division of Corporation
Finance and embrace confidential filings forregistration statements tied to new offerings. Under
the confidential review process, an issuer can takethe initial steps towards going public or beginninga follow-on offering without revealing sensitive
information to the public (or competitors). This
provides issuers with greater flexibility to plan
their offerings to account for changes in market
conditions, regulatory considerations or investor
demand, allowing offerings to become public at atime the issuer believes is appropriate. Further,
an issuer might not want to announce that it is4

pursuing entering the public markets until thatoffering is more certain to take place in order to keep
its business and financial information confidentialfrom copycat investors or other opportunistic actors.
These benefits apply to investment companies and
BDCs just as much as any other corporate issuers,
and would be particularly helpful for investmentcompanies and BDCs that may have novel investment
strategies or offering structures.

European Union Reforms
Could Disrupt U.S. Soft
Dollar Practices; Industry
Anxiously Waiting for the
SEC to Act
The Council of the European Union, through its
Markets in Financial Instruments Directive (“MiFIDII”), is changing how investment advisers can use
client commissions to pay for securities research.
These changes are far reaching and are poised
to have a ripple effect in the United States andthroughout the world.
Significantly, MiFID will ban the very common
practice of an investment adviser using bundledclient trading commissions to pay for securities
research. That ban is scheduled to become effectivein the European Economic Area (“EEA”) on January
3, 2018. Under MiFID II, an investment adviser
located in the EEA must pay the costs for research
directly or pay for that research with “unbundled”
client commissions deposited into a new kind of
account, called a research payment account (“RPA”).
RPAs are similar to the currently-used client
commission arrangement (“CCA”), but there area few differences. The RPA would be funded withpayments for research that are charged separatelyfrom payments for execution. In addition, theinvestment adviser – not a broker-dealer – would
control the RPA. MiFID II also requires theinvestment adviser to negotiate a research budget
with the client and regularly assess that budget
and annually disclose to the client the total cost ofresearch. While research payments can be madein connection with a transaction, the total amountmust be based on the set budget and cannot belinked to trading volume or the value of transactions.
Investment advisers must also have a process inplace to rebate any surplus budget in the following
period and provide a written policy to clients
describing all necessary information, including how

the investment adviser intends to allocate costs fairly
across various clients’ RPAs.
MiFID II applies to investment personnel exercising
investment discretion from offices located in the
EEA regardless of whether they are managing
accounts located in the United States, including for
U.S. registered investment companies. Under thesecircumstances, an investment adviser or subadviser
located in, or with personnel located in, the EEA
exercising investment discretion over an accountlocated in the United States would be subject tocompliance with rules governing payments forsecurities research under both the EEA and U.S.
regulatory regimes.
Unfortunately, the unbundled approach permitted
by MiFID II does not align with the current U.S.
regulatory regime and the safe harbor investment
advisers rely on under Section 28(e) of the ExchangeAct. This article discusses this issue, but MiFID
II also raises other questions outside the scope of
this article. For example, a broker-dealer’s offeringof unbundled commissions raises the questionof whether the broker-dealer must register as aninvestment adviser under the Advisers Act. For
registered investment companies, variations in the
total transaction cost of aggregated trades may raise
joint transaction concerns under Section 17(d) of
the 1940 Act because they could be construed tobe participating on a basis different from, or lessadvantageous, than other clients.
Turning to the impact of MiFID II on soft dollar
practices in the United States under the Section
28(e) safe harbor, an investment adviser thatsatisfies the conditions of the statute is permitted
to use client commissions to pay a broker-dealer
more than the lowest available commission rate fora bundle of products and services provided by thebroker-dealer (i.e., more than “pure execution”).
Historical SEC guidance in this area has beenpremised on the protections of Section 28(e) being
available only when an investment adviser pays
a bundled “commission” for both brokerage andresearch services.

“

The implementation of MiFID II creates asevere problem for investment advisers in the U.S.
with operations in the EEA.

”

The implementation of MiFID II creates a severe
problem for investment advisers in the United Stateswith operations in the EEA. The question is how suchan investment adviser can comply with MiFID II’srequirement for unbundled research payments when,5

in the United States, the law and guidance has todate presumed a bundled commission.
An investment adviser has a fiduciary duty to invest
client assets prudently and seek best execution
when executing trades, which includes engaging
in a balancing act weighing the costs of executing
a transaction with the amount being charged forresearch. Providing a mechanism to support the
unbundling of research and execution costs likely
will require additional disclosure to investors, giving
investors the benefit of increased transparency. The
heightened transparency provided by the unbundlingof research from execution costs may ultimately
lead to increased fairness to investors and stronger
investor protection – two of the cornerstones uponwhich the SEC was founded. Moreover, those who
deal with the European trading environment may
begin to question why they cannot obtain the samelevel of transparency regarding the cost of researchwhen conducting transactions in the United States.
The SEC needs to act to address these concerns,
or explain why it does not support transparency
in the execution of brokerage transactions in U.S.
financial markets.
Guidance to facilitate MiFID II-compliant research
payments within the Section 28(e) safe harboralso is fully consistent with the enacting spirit ofSection 28(e), which strove to protect the market
for research services. One of the concerns that led
to the enactment of Section 28(e)’s safe harbor wasthat research services could have dried up or thecost of such services could have been unfairly passed
on to investment advisers. To the extent relief is
not provided, there may be a decline in the amountof research used by investment advisers who mustcomply with MiFID II, with a potential collateralnegative impact on investment performance. This
result clearly would be contrary to Congressional
intent.
The U.S. and MiFID II approaches are bothpredicated on ensuring that clients of investment
advisers have transparency into the costs of receiving
valuable services and best execution standards are
met. Broadening the scope of the Section 28(e) safe
harbor is imperative to provide the financial markets
with cost-efficient options for complying withmultiple and conflicting extraterritorial complianceregimes. Fortunately, the SEC and its staff have along history of responding to market participants’concerns with the impact of new developmentson the availability of Section 28(e) for investment
advisers. We have every confidence that the SEC staff
is taking this matter very seriously and is seeking totake steps that will better facilitate implementationof MiFID II and also retain the ability of investment
advisers to rely on the Section 28(e) safe harbor.

SEC Focus on BDCs Appears
to be Increasing: OCIE Issues
Examination Requests toInvestment Advisers of BDCs
In June 2017, the SEC’s Office of Compliance
Inspections and Examinations (“OCIE”) began
issuing examination requests to investment
advisers of BDCs requesting certain information
pertaining to BDC operations (the “BDC Request
Letters”). Among other things, the BDC Request
Letters request a significant amount of information
related to the role of BDC investment advisers andassociated fees and payments. The BDC Request
Letters also indicate potential increased interest on
the part of the SEC Staff in BDCs which, for the mostpart, generally have steered clear of involvementin SEC enforcement matters. As the market shareof BDCs continues to grow, and the SEC continues
to shift examination and enforcement resources toinvestment sectors with a heavy retail nexus, we
expect that the SEC’s interest in BDCs and theirinvestment advisers will continue to grow as well.
As is the case with many request letters, the BDC
Request Letters are broad, and request varying levels
of information. For example, one letter requests
information in the following categories: general
information; fund compliance, risk management,
and internal controls; fund corporate governance;
conflicts of interest/insider trading; fund investment
activities; compensation arrangements; fee andexpense reimbursement; valuation of fund portfolio
assets; capital structure; financial records; and otherrecords that pertain to the adviser. In contrast,
another letter simply seeks information categorizedwith respect to the BDC and its adviser. In addition,
one letter has nearly 100 itemized requests, while
another letter has approximately half that number.
Much of the information requested in the BDC
Request Letters is typical of examination document
requests – information about directors/trustees and6officers, information about service providers, andgeneral compliance information. Notably, however,
one of the letters requests trade blotter and holdings
information in Excel format, indicating that the SEC
may be using data analytics to assess, and perhaps
compare, BDCs. Another request letter also asks for
information about trade blotters, but broadens thescope of earlier letters by requesting in a separate
attachment information about former clients andproprietary and/or trading accounts and accesspersons.
A notable characteristic of these request letters isthat they request information about fee and expense
reimbursement calculations. Unlike other types ofregistered funds, BDC investment advisers typicallycharge incentive fees in addition to management
fees. While externally managed BDCs must include
extensive disclosure regarding the calculation of
incentive fees in their registration statements, todate, the SEC Staff has not taken a formal position
regarding how they believe incentive fees should
be calculated. One of the letters specifically asks
for written policies and procedures addressing
the calculation of fees and reimbursement of fundexpenses, Excel spreadsheets supporting the
calculation of management fees and incentive fees,a schedule of all expense reimbursements made toa BDC, and an Excel spreadsheet with quarterly
NAV calculations. This may signal that the SEC isgathering information in advance of a more thoroughreview of incentive fee calculations in the future.
Given the SEC’s prior interest in private equity fee
matters, coupled with a focus on retail investors, thisdevelopment may be viewed as a natural progression– as private equity “goes retail,” the examiners follow.

Another focus area of the BDC Request Letters
is investments in eligible portfolio companies(“EPCs”), an investment requirement unique to
BDCs. BDCs were established as a means of making
capital more readily available to small, developing,and financially troubled companies that would
not otherwise have access to capital markets orconventional financing. As such, BDCs typicallycannot acquire other assets unless at least 70% of a

BDC’s total assets are invested in securities of EPCs.
The BDC Request Letters ask for a list of a BDC’s
holdings for each quarter and an indication as towhether the security is an EPC. They also request
a list of portfolio companies to which the BDC has
provided or offered to provide managerial assistance,
whether these companies are identified as EPCs,
as well as the specific criteria that define the entity
as an EPC. The letters also request identification of
any positions that lost status as an EPC due to theissuance of a class of securities that are “margin
eligible.”1 These requests in the BDC Request Lettersconcerning EPCs indicate that the SEC Staff may befocused on how BDCs are classifying and treating
EPCs, including whether in the SEC’s view advisers
may be taking a lax approach to maintaining therequired level of EPC investments in order to pursue
other, potentially more lucrative, discretionary
investments.
Issuance of the BDC Request Letters follows the
FINRA targeted exam letters that were issuedin August 2016 to certain of its broker-dealer
registrants requesting: (1) a list of each BDC offered
by a firm and the firm’s role in the offering (i.e.,
dealer manager, distributor, etc.); (2) for each BDC
offered, a list of all participating broker-dealersthat have selling arrangements with the firm andsample copies of selling agreements utilized; (3) an
Excel list of all broker-dealers that sold the BDCs
to customers in initial or follow-on offerings andinformation about the sales from those offerings;
and (4) a copy of the firm’s due diligence procedures.
FINRA has not announced the results of the targeted
exam, although it did indicate in its 2017 Regulatory
and Examination Priorities Letter that it would
be considering the suitability of non-traded BDCs,
among other products, for certain types of investors.
Collectively, the FINRA target exam letters, followedby the BDC Request Letters from the SEC suggestthat regulators intend to take a close look at fee
and expense practices in the BDC sector, which isconsistent with recent messaging from SEC seniorleadership concerning the importance of protecting
potentially vulnerable retail investors. Although it
remains to be seen whether the level of SEC scrutiny
will approximate the increased spotlight placed on
the private equity industry in 2012, the BDC Request
Letters suggest that the industry should brace for alevel of sustained scrutiny, which will likely have aconcomitant market effect of enhancing overall levelsof transparency in the BDC industry.
1. The 1940 Act defines EPCs to include any domestic operating company
that, among other things, does not have a class of securities that is
marginable under Federal Reserve Board rules. Generally, margin stockincludes equity securities registered on a national securities exchange, any
over-the-counter security trading in the Nasdaq Stock Market’s National
Market, any debt security convertible into a margin stock, and most mutual
funds under Regulation U.
7

M&A Transactions
Acquiror

Acquired or
Target Company

Type of Transactionand Status

BlackRock, the world's largest
asset manager with approximately$5.4 trillion AUM

Scalable Capital, an Anglo-German digital
investment manager

Acquisition of minority
position. BlackRock led a€30 million funding roundfor Scalable alongside its
two existing German venture
capital backers.

DiMeo Schneider & Associates,
L.L.C., an asset manager withapproximately $66 billion AUM

ORION Investment Advisors, a registeredinvestment adviser

Acquisition(terms not disclosed)

Domain Timber Advisors, LLC,
a registered investment adviser and anaffiliate of Domain Capital Advisors,
LLC with approximately $5.3 billion
AUM

Timbervest, LLC’s fund management business

Acquisition(terms not disclosed)

Dyal Capital Partners, a divisionof Neuberger Berman Group withapproximately $351 million AUM

TPG Sixth Street Partners, global credit andcredit-related investment firm affiliated with TPG
Holdings with approximately $20 billion AUM

Acquisition of a passive,
non-voting minority interest(terms not disclosed)

Dyal Capital Partners, a division of
Neuberger Berman Group

Atalaya Capital Management, a private credit
and special opportunities alternative investment
manager with approximately $2.5 billion AUM

Acquisition of a passive,
non-voting minority interest(terms not disclosed)

HighTower Advisors, LLC,
a national adviser-owned financial
services company

Lee Equity Partners, a New York based private
equity firm with approximately $6.4 billion AUM

Acquisition(terms not disclosed)

Invesco Ltd., an independent
investment management firm

Source, an investment firm and majority owned byan affiliate of Warburg Pincus

Acquisition. Transaction
includes $18 billion in
Source-managed AUM, plus
approximately $7 billion inexternally managed AUM

MainSource Financial Group,
a community-focused, financial
holding company with assets ofapproximately $4.6 billion AUM

Capstone Investment Management, LLC,
an independent firm

Acquisition(terms not disclosed)

RMB Capital, an independent,
diversified financial services firmwith approximately $6.7 billion AUM

VennWell, LLC, a financial planning andinvestment management firm with approximately$250 million AUM

Acquisition(terms not disclosed)

Rosemont Investment Partners,
LLC, a specialist private equity firm

Hartland $ Co., LLC, an institutional and wealthadvisory firm with approximately $18 billion AUM

Acquisition of minority
position (terms notdisclosed). Management-led
recapitalization.

8

M&A Transactions (continued)
Acquiror

Acquired or
Target Company

Type of Transactionand Status

Schroders plc, a global investment
manager with $490.7 billion AUM

Adveq Holding AG, an asset manager
investing in private equity globally with
$7 billion AUM

Acquisition(terms not disclosed)

KKR & Co. L.P., a global investment
firm, and Stone Point Capital LLC,
a financial services-focused private
equity firm with $13 billion AUM

Focus Financial Partners, a partnership ofindependent, fiduciary wealth management firms

Acquisition of a majority
position (terms not disclosed)

Touchstone Advisors, Inc., a whollyowned subsidiary of Western & Southern
Financial GroupSentinel Asset Management, Inc.,a Vermont-based diversified asset management
firm and an indirect wholly-owned subsidiary of
National Life Holding, with $5.54 billion AUM

Acquisition of certain
assets of Sentinel AssetManagement, Inc. related tothirteen Sentinel funds being
reorganized into Touchstone
fundsWhite Oak Equity Partners, a private
equity investor focused on acquiring
minority GP interests in hedge fundswith approximately $2 billion AUM

ROW Asset Management, systematicquantitative global macro investment firm withover $800 million AUM

Acquisition of minority
position (terms not disclosed)

Closed-End Fund Initial Public Offerings
AllianzGI Convertible & Income 2024 Target Term Fund (NYSE: CBH)
Amount Raised(Inception Date):$165 million (June 27, 2017)

Investment
Objective/Policies:

The Fund’s investment objectives are to provide a high level of income and to return at least $9.835 percommon share (the original net asset value per common share of beneficial interest before deducting
offering costs of $0.02 per share) to holders of common shares on or about September 1, 2024. The
Fund will normally invest at least 80% of its managed assets in a diversified portfolio of convertible
securities and income-producing debt instruments. It is expected that a portion of the Fund’s incomeproducing debt instruments will consist of high yield securities (sometimes referred to as “high yield” or“junk” securities), which are securities that are, at the time of investment, rated below investment grade(below Baa3 by Moody’s Investors Service, Inc. or below BBB- by either S&P Global Rating Services or
Fitch Ratings Inc.) or that are unrated but determined by the Investment Manager to be of comparable
quality. A portion of the Fund’s portfolio is also generally expected to consist of senior secured loans.
The Fund will invest primarily in the securities or instruments of U.S. issuers.

Manager:

Allianz Global Investors U.S. LLC

Book-runners:

Wells Fargo Securities, LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Morgan Stanley & Co. LLC, and UBS Securities LLC

9

Simpson Thacher’s dynamic, long-standing Registered Funds Practice encompasses all
aspects of the investment management business. Our practice focuses on alternative asset
managers seeking to access retail investor channels, asset management mergers andacquisitions, and advising on cutting-edge regulatory policy and strategy matters.
David W. Blass • 1-202-636-5863 • david.blass@stblaw.com
David Blass is a Partner in Simpson Thacher & Bartlett LLP’s Investment Funds Practice. David is a leading
regulatory lawyer in the funds industry and has advised on matters involving innovative registered funds
products, Investment Advisers Act compliance, SEC examination and enforcement matters, and broker-dealer
regulatory compliance. Prior to joining Simpson Thacher, David served as General Counsel of the Investment
Company Institute (ICI), where he was responsible for the full range of legal and regulatory matters affecting
the asset management industry, including investment company, capital markets, pension and tax issues. He alsopreviously was Chief Counsel of the SEC’s Division of Trading and Markets.

Rajib Chanda • +1-202-636-5543 • rajib.chanda@stblaw.com
Rajib Chanda is a Partner in the Washington, D.C. and New York offices of Simpson Thacher & Bartlett LLP,
and is the Head of the Firm’s Registered Funds Practice. Rajib’s practice focuses on all aspects of issues facing
registered investment advisers and sponsors of registered funds. Rajib has particular experience working withalternative asset managers seeking to access retail investor channels through mutual funds, business development
companies, closed-end funds, exchange-traded funds and permanent capital vehicles. He also works extensively
with more traditional registered fund sponsors and works closely with the firm’s asset management M&Agroup on transactions involving registered advisers and funds. In addition, Rajib provides counsel to boardsof registered funds, and has substantial experience advising companies on issues relating to social media andcybersecurity.

Sarah E. Cogan • +1-212-455-3575 • scogan@stblaw.com
Sarah Cogan is a Partner in the New York office of Simpson Thacher & Bartlett LLP. Sarah’s practiceencompasses all aspects of the registered funds industry and she represents closed-end investment companies,
open-end mutual funds, investment advisers and independent directors of investment companies. She has aparticular expertise in advising underwriters and sponsors in offerings by closed-end funds and businessdevelopment companies. In addition, Sarah advises fund clients on corporate and securities law, including
investment management, regulatory, compliance and M&A matters.

The contents of this publication are for informational purposes only. Neither this publication nor the
lawyers who authored it are rendering legal or other professional advice or opinions on specific facts
or matters, nor does the distribution of this publication to any person constitute the establishment of
an attorney-client relationship. Simpson Thacher & Bartlett LLP assumes no liability in connection
with the use of this publication. Please contact your relationship partner if we can be of assistanceregarding these important developments. The names and office locations of all of our partners, as wellas our recent memoranda, can be obtained from our website, www.simpsonthacher.com.

10SimpsonThacherWorldwide

UNITED STATESEUROPE

SOUTH AMERICANew York
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New York, NY 10017+1-212-455-2000

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Japan+81-3-5562-6200
11