A ’40 Act fund is an investment company registered under the Investment Company Act of 1940 — the statute governing pooled investment vehicles offered to the public. Mutual funds, ETFs, closed-end funds, interval funds, and (by election) BDCs all live under it, and “’40 Act wrapper” is the industry’s shorthand for delivering a strategy in registered, retail-eligible form.
What the wrapper provides
Registration brings a package of structural protections private funds lack: an independent board (with independent trustees overseeing the adviser's contract and conflicts), custody requirements, leverage limits (asset-coverage tests capping borrowing), affiliated-transaction prohibitions, daily or periodic NAV computation under board-approved valuation procedures, public disclosure, and 1099 tax reporting through RIC (regulated investment company) status. Private funds exist precisely by avoiding this statute — the 3(c)(1) and 3(c)(7) exemptions behind hedge funds and private equity funds are exemptions from the '40 Act — which is why eligibility rules (accredited investor, qualified purchaser) attach to unregistered funds but generally not to registered ones. The alternatives industry’s retail expansion has largely been an exercise in fitting private-markets strategies into ’40 Act wrappers: interval funds, tender offer funds, and non-traded BDCs trade some strategy flexibility for the wrapper’s protections and reach.
Related terms
Interval Fund · Closed-End Fund · BDC · Independent Trustee · Qualified Purchaser
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