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On April 27, 2026, the SEC Staff issued a no-action letter to J.P. Morgan Investment Management Inc. (“JPMIM”), an investment adviser to a large complex of registered and non-registered funds, which had previously received an order from the SEC permitting its registered closed-end funds and business development companies (“BDCs”) to participate with its non-registered private funds in co-investment opportunities. The no-action letter (a) broadens JPMIM’s co-investment order by permitting registered open-end funds managed by JPMIM and its affiliates also to participate in those co-investment opportunities, and (b) allows a committee of independent directors of a registered (closed- or open-end) fund or BDC, rather than a majority of all independent directors, to approve the registered fund’s or BDC's acquisition of a security in a co-investment transaction in which an affiliate either has an existing interest or the affiliate is disposing of the security that is being acquired by the registered fund or BDC. 

Co-Investments and Existing Co-Investment Exemptive Relief

Most private equity and venture capital funds (“private funds”) invest primarily, if not exclusively, in unregistered securities, that is, securities issued in private placements and which are not traded on exchanges or otherwise offered to the public. As a result, private fund portfolios tend to be very illiquid, and the funds themselves often provide limited investor liquidity. For that reason, most private funds are offered only to institutional investors and high net-worth individuals.

From time to time, private funds are offered investment opportunities to which they cannot fully subscribe. Co-investment orders issued by the SEC currently allow an investment adviser to invest assets of its registered closed-end funds and BDCs with the assets of its private funds in those co-investment opportunities. Without the order, closed-end funds and BDCs would be prohibited from making co-investments with private funds because of the potential conflicts raised by joint transactions with affiliated entities, i.e., the other participating funds. 

To date, co-investment orders have not been extended to registered open-end funds.    

No-Action Relief Granted to JPMIM

The SEC Staff granted both of JPMIM’s requests for no-action relief: 

  • Relief to permit JPMIM-advised registered open-end funds to participate in co-investment opportunities under the same conditions of its co-investment order as its registered closed-end funds and BDCs are permitted to participate.
  • Relief to permit a committee of the independent directors of a registered (open- or closed-end) fund or BDC to approve the fund’s or BDC’s participation in a co-investment transaction, rather than a majority of all independent directors. Importantly, the SEC Staff conditioned its relief on a requirement that the committee consist of at least three independent trustees and that the committee deliver to the full board a report of all co-investment transactions it considered.

Some Observations

We note the following:

  • This no-action relief is expected to facilitate registered open-end fund participation in co-investment opportunities and further democratize the market for investments in privately issued securities, consistent with President Trump’s executive order “Democratizing Access to Alternative Assets for 401(k) Investors” (August 7, 2025). 
  • The SEC Staff granted no-action relief rather than requiring registered fund complexes to amend their existing co-investment orders. As no-action relief, other firms operating under orders with comparable conditions generally may also rely on the relief given to JPMIM, so long as they comply with the same representations and limitations described in the SEC Staff’s response.
  • Currently, co-investment orders require that prior to a closed-end fund or BDC acquiring a security in a co-investment transaction in whose issuer an affiliated entity of the closed-end fund or BDC has an existing interest or is disposing of a security in a co-investment transaction, a “required majority” of the fund’s independent directors must determine that (a) the terms of the transaction are reasonable and fair to fund shareholders, and (b) the proposed transaction is consistent with the interests of fund shareholders and the fund’s policies. The JPMIM no-action letter does not change those requirements, other than to allow for the “required majority” findings to be made by a committee of independent directors, rather than all independent directors. 
  • Although not addressed in the JPMIM no-action letter, registered open-end funds and their independent directors should also consider whether a fund’s liquidity risk management program is suitable for co-investment transactions. Unlike registered closed-end funds and BDCs, registered open-end funds are subject to strict limits on investments in illiquid securities to ensure that they can provide their shareholders daily liquidity at net asset value.
  • Neither the JPMIM no‑action letter nor the incoming request letter addresses whether the no-action letter’s co‑investment relief extends to an exchange‑traded fund (“ETF”). For an ETF organized as a registered open-end fund, it presumably would. However, as many co‑investment securities generally are subject to strict transferability restrictions, an ETF that currently operates as an in‑kind ETF—i.e., where the ETF sells and redeems it creation units in kind and the structure used by many equity and bond ETFs—may incur increased transaction costs and give up some tax efficiency in order to participate in co‑investment transactions. An ETF that sells and redeems its creation units primarily in cash, however, would not be materially affected.  

For More Information

This Client Alert has been prepared by John Hunt, a Partner, and Mike Davalla, Counsel, in the Investment Management practice group of the international law firm of Sullivan & Worcester LLP. For more information, Mr. Hunt may be reached in our Boston office by calling +1 (617) 338-2961 or our London office by calling +44 (0)20 7448 1000, or by email at jhunt@sullivanlaw.com; Mr. Davalla may be reached in our Boston office by calling +1 (617) 338-2804 or our Washington, D. C. office by calling +1 (202) 775-2200, or by email at mdavalla@sullivanlaw.com

Rachael Schwartz, a Partner in the Investment Management practice group in our New York office, also provided valued assistance.

This Client Alert is provided for general informational purposes only and does not constitute legal advice.