Clifford Chance

Lifting the Cap on Closed-End Funds: SEC Removes 15% Limit on Closed-End Funds’ Investments in Private Funds

26 May 2025

This week, the US Securities and Exchange Commission announced that it will no longer require certain closed-end funds registered under the Investment Company Act of 1940, as amended (the “1940 Act”) to limit their investments in funds relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act (“private funds”) to 15% of their net assets. Prior to this announcement, closed-end funds that proposed to invest more than 15% of their net assets in private funds were required by the SEC staff to limit the sale of their shares to investors: (i) who were “accredited investors,” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended and (ii) whose minimum initial investment was $25,000. These requirements were restrictions imposed by the SEC staff, not by rule or statute, but through the staff’s registration statement comment process. 

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