For those of us working with registered investment advisers, the deadline for filing Form ADV is quickly approaching.
I’ve heard a few people struggling to classify their clients. I put together this chart to help me think about it.
With the recent changes to Form ADV, I see the SEC carving client accounts into two big buckets: Separately Managed Accounts and Pooled Investment Vehicles.
Each of those big buckets is separated into further classifications.
I found the name “separately managed accounts” to be confusing because it sounds a lot like the insurance term “separate accounts.”
I heard a lot of uncertainty on how to treat a fund of one. It could be a pooled investment vehicle. Or it could be a separately managed account. I have not heard anything to help draw the line. The best advice I’ve heard is to just be consistent. If you treat the fund of one operationally like you treat your other funds, then label it that way on the Form ADV. If you treat it operationally like you treat your separately managed accounts, then label it that way on the Form ADV.
For real estate managers, it sounds like they have some investment vehicles that are not private funds. Some of this discussion goes back to the 2012 thoughts on whether to register with the SEC or not. A straight real estate investment with a couple of investors with major action consent sounds like it falls out of the “private fund” definition. That real estate investment does not have securities, so it should fall outside the definition of an investment company. Even if it were so treated, it would be entitled to the 3(c)5 exemption. That would keep it outside the “private fund” definition.
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