[Federal Register Volume 77, Number 231 (Friday, November 30, 2012)]
[Notices]
[Pages 71462-71464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-28951]


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SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 30280; 812-14026]


Blackstone Alternative Alpha Fund, et al.; Notice of Application

November 26, 2012.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 18(c) 
and 18(i) of the Act and for an order pursuant to section 17(d) of the 
Act and rule 17d-1 under the Act.

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SUMMARY: Summary of Application: Applicants request an order to permit 
certain registered closed-end management investment companies to issue 
multiple classes of shares of beneficial interest (``Shares'') and to 
impose asset-based service and/or distribution fees and contingent 
deferred sales loads (``CDSCs'').

Applicants: Blackstone Alternative Alpha Fund (the ``Feeder Fund''), 
Blackstone Alternative Alpha Master Fund (the ``Master Fund''), 
Blackstone Alternative Asset Management L.P. (the ``Adviser'') and 
Blackstone Advisory Partners L.P. (the ``Distributor'').

DATES: Filing Dates: The application was filed on April 13, 2012, and 
amended on September 19, 2012.

Hearing or Notification of Hearing: An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving applicants with a copy of the request, personally 
or by mail. Hearing requests

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should be received by the Commission by 5:30 p.m. on December 24, 2012, 
and should be accompanied by proof of service on the applicants, in the 
form of an affidavit, or, for lawyers, a certificate of service. 
Hearing requests should state the nature of the writer's interest, the 
reason for the request, and the issues contested. Persons who wish to 
be notified of a hearing may request notification by writing to the 
Commission's Secretary.

ADDRESSES: Elizabeth M. Murphy, Secretary, U.S. Securities and Exchange 
Commission, 100 F Street NE., Washington, DC 20549-1090; Applicants, c/
o Peter Koffler, Esq., Blackstone Alternative Asset Management L.P., 
345 Park Avenue, 28th Floor, New York, NY 10154.

FOR FURTHER INFORMATION CONTACT: Laura L. Solomon, Senior Counsel, at 
(202) 551-6915 or Daniele Marchesani, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Office of Investment Company 
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site by searching for the file number, or an applicant 
using the Company name box, at http://www.sec.gov/search/search.htm or 
by calling (202) 551-8090.

Applicants' Representations

    1. The Feeder Fund and the Master Fund are continuously offered 
non-diversified closed-end management investment companies registered 
under the Act and organized as Massachusetts business trusts. The 
Feeder Fund operates as a feeder fund in a master-feeder structure and 
intends to invest substantially all of its assets in the Master Fund. 
The Master Fund invests in non-traditional or ``alternative'' 
strategies which may include investment funds commonly referred to as 
``hedge funds.''
    2. The Adviser, a Delaware limited partnership and wholly owned 
subsidiary of The Blackstone Group L.P., is registered as an investment 
adviser under the Investment Advisers Act of 1940 and serves as 
investment adviser to the Feeder Fund and the Master Fund. The 
Distributor, a broker-dealer registered under the Securities Exchange 
Act of 1934 (``1934 Act''), acts as the principal underwriter of the 
Feeder Fund. The Distributor is under common control with the Adviser 
and is an affiliated person, as defined in section 2(a)(3) of the Act, 
of the Adviser.
    3. The Feeder Fund continuously offers its Shares \1\ to the public 
under the Securities Act of 1933, as amended (the ``Securities Act''). 
Shares of the Feeder Fund are not listed on any securities exchange and 
do not trade on an over-the-counter system such as Nasdaq. Applicants 
do not expect that any secondary market will develop for the Shares.
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    \1\ ``Shares'' includes any other equivalent designation of a 
proportionate ownership interest of the Feeder Fund (or any other 
registered closed-end management investment company relying on the 
requested order).
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    4. The Feeder Fund currently offers a single class of Shares (the 
``Initial Class'') at net asset value per share subject to a sales load 
and annual asset-based service and distribution fee and proposes to 
issue multiple classes of Shares. The Feeder Fund proposes to offer a 
new Share class (the ``New Class'') at net asset value that may (but 
would not necessarily) be subject to a front-end sales load and an 
annual asset-based service and/or distribution fee. The Feeder Fund 
intends to continue to offer Initial Class Shares, subject to a sales 
load, a service and/or distribution fee, and minimum purchase 
requirements.
    5. In order to provide a limited degree of liquidity to 
shareholders, the Feeder Fund may from time to time offer to repurchase 
Shares at their then current net asset value in accordance with rule 
13e-4 under the 1934 Act pursuant to written tenders by 
shareholders.\2\ Repurchases will be made at such times, in such 
amounts and on such terms as may be determined by the Feeder Fund's 
board of trustees (``Board''), in its sole discretion.\3\ The Adviser 
expects to ordinarily recommend that the Board authorize the Feeder 
Fund to offer to repurchase Shares from shareholders quarterly.
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    \2\ Likewise, the Master Fund's repurchase offers are conducted 
pursuant to rule 13e-4 under the 1934 Act.
    \3\ Shares are subject to an early withdrawal fee at a rate of 
2% of the aggregate net asset value of the shareholder's Shares 
repurchased by the Feeder Fund (the ``Early Withdrawal Fee'') if the 
interval between the date of purchase of the Shares and the 
valuation date with respect to the repurchase of those Shares is 
less than one year. The Early Withdrawal Fee will equally apply to 
all shareholders of the Feeder Fund, regardless of class, consistent 
with section 18 of the Act and rule 18f-3 under the Act. To the 
extent the Feeder Fund determines to waive, impose scheduled 
variations of, or eliminate the Early Withdrawal Fee, it will do so 
consistently with the requirements of rule 22d-1 under the Act and 
apply uniformly to all shareholders of the Feeder Fund.
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    6. Applicants request that the order also apply to any other 
continuously offered registered closed-end management investment 
company existing now or in the future for which the Adviser, the 
Distributor, or any entity controlling, controlled by, or under common 
control with the Adviser or the Distributor acts as investment adviser 
or principal underwriter, and which provides periodic liquidity with 
respect to its Shares through tender offers conducted in compliance 
with rule 13e-4 under the 1934 Act.\4\
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    \4\ The Feeder Fund and any other investment company relying on 
the requested relief will do so in a manner consistent with the 
terms and conditions of the application. Applicants represent that 
any person presently intending to rely on the requested relief is 
listed as an applicant.
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    7. Applicants represent that any asset-based service and/or 
distribution fees will comply with the provisions of rule 2830(d) of 
the Conduct Rules of the National Association of Securities Dealers, 
Inc. (``NASD Conduct Rule 2830'') as if that rule applied to the Feeder 
Fund.\5\ Applicants also represent that the Feeder Fund will disclose 
in its prospectus, the fees, expenses and other characteristics of each 
class of Shares offered for sale by the prospectus as is required for 
open-end multiple class funds under Form N-1A. As is required for open-
end funds, the Feeder Fund will disclose its expenses in shareholder 
reports, and disclose any arrangements that result in breakpoints in or 
elimination of sales loads in its prospectus.\6\ The Feeder Fund and 
the Distributor will also comply with any requirements that may be 
adopted by the Commission or FINRA regarding disclosure at the point of 
sale and in transaction confirmations about the costs and conflicts of 
interest arising out of the distribution of open-end investment company 
shares, and regarding prospectus disclosure of sales loads and revenue 
sharing arrangements as if those requirements applied to the Feeder 
Fund and the Distributor.\7\
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    \5\ All references to NASD Conduct Rule 2830 include any 
successor or replacement rule that may be adopted by the Financial 
Industry Regulatory Authority (``FINRA'').
    \6\ See Shareholder Reports and Quarterly Portfolio Disclosure 
of Registered Management Investment Companies, Investment Company 
Act Release No. 26372 (Feb. 27, 2004) (adopting release) (requiring 
open-end investment companies to disclose fund expenses in 
shareholder reports); and Disclosure of Breakpoint Discounts by 
Mutual Funds, Investment Company Act Release No. 26464 (June 7, 
2004) (adopting release) (requiring open-end investment companies to 
provide prospectus disclosure of certain sales load information).
    \7\ See, e.g., Confirmation Requirements and Point of Sale 
Disclosure Requirements for Transactions and Certain Mutual Funds 
and Other Securities, and Other Confirmation Requirement Amendments, 
and Amendments to the Registration Form for Mutual Funds, Investment 
Company Act Release No. 26341 (Jan. 29, 2004) (proposing release).
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    8. The Feeder Fund will allocate all expenses incurred by it among 
the various classes of Shares based on the net assets of the Feeder 
Fund

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attributable to each class, except that the net asset value and 
expenses of each class will reflect distribution fees, service fees, 
and any other incremental expenses of that class. Expenses of a Feeder 
Fund allocated to a particular class of Shares will be borne on a pro 
rata basis by each outstanding Share of that class. Applicants state 
that the Feeder Fund will comply with the provisions of rule 18f-3 
under the Act as if it were an open-end investment company.
    9. In the event the Feeder Fund imposes a CDSC, the applicants will 
comply with the provisions of rule 6c-10 under the Act, as if that rule 
applied to closed-end management investment companies. With respect to 
any waiver of, scheduled variation in, or elimination of the CDSC, the 
Feeder Fund will comply with rule 22d-1 under the Act as if the Feeder 
Fund were an open-end investment company.

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(c) of the Act provides, in relevant part, that a 
closed-end investment company may not issue or sell any senior security 
if, immediately thereafter, the company has outstanding more than one 
class of senior security. Applicants state that the creation of 
multiple classes of Shares of the Feeder Fund may be prohibited by 
section 18(c).
    2. Section 18(i) of the Act provides that each share of stock 
issued by a registered management investment company will be a voting 
stock and have equal voting rights with every other outstanding voting 
stock. Applicants state that permitting multiple classes of Shares of 
the Feeder Fund may violate section 18(i) of the Act because each class 
would be entitled to exclusive voting rights with respect to matters 
solely related to that class.
    3. Section 6(c) of the Act provides that the Commission may exempt 
any person, security or transaction or any class or classes of persons, 
securities or transactions from any provision of the Act, or from any 
rule under the Act, if and to the extent such exemption is necessary or 
appropriate in the public interest and consistent with the protection 
of investors and the purposes fairly intended by the policy and 
provisions of the Act. Applicants request an exemption under section 
6(c) from sections 18(c) and 18(i) to permit the Feeder Fund to issue 
multiple classes of Shares.\8\
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    \8\ The Master Fund will not issue multiple classes of its 
shares and is an applicant because of the master-feeder structure.
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    4. Applicants submit that the proposed allocation of expenses and 
voting rights among multiple classes is equitable and will not 
discriminate against any group or class of shareholders. Applicants 
submit that the proposed arrangements would permit the Feeder Fund to 
facilitate the distribution of its Shares and provide investors with a 
broader choice of shareholder options. Applicants assert that the 
proposed closed-end investment company multiple class structure does 
not raise the concerns underlying section 18 of the Act to any greater 
degree than open-end investment companies' multiple class structures 
that are permitted by rule 18f-3 under the Act. Applicants state that 
the Feeder Fund will comply with the provisions of rule 18f-3 as if it 
were an open-end investment company.

CDSCs

    1. Applicants believe that the requested relief meets the standards 
of section 6(c) of the Act. Rule 6c-10 under the Act permits open-end 
investment companies to impose CDSCs, subject to certain conditions. 
Applicants state that any CDSC imposed by the Feeder Fund will comply 
with rule 6c-10 under the Act as if the rule were applicable to closed-
end investment companies. The Feeder Fund also will disclose CDSCs in 
accordance with the requirements of Form N-1A concerning CDSCs as if 
the Feeder Fund were an open-end investment company. Applicants further 
state that the Feeder Fund will apply the CDSC (and any waivers or 
scheduled variations of the CDSC) uniformly to all shareholders in a 
given class and consistently with the requirements of rule 22d-1 under 
the Act.

Asset-Based Service and/or Distribution Fees

    1. Section 17(d) of the Act and rule 17d-1 under the Act prohibit 
an affiliated person of a registered investment company or an 
affiliated person of such person, acting as principal, from 
participating in or effecting any transaction in connection with any 
joint enterprise or joint arrangement in which the investment company 
participates unless the Commission issues an order permitting the 
transaction. In reviewing applications submitted under section 17(d) 
and rule 17d-1, the Commission considers whether the participation of 
the investment company in a joint enterprise or joint arrangement is 
consistent with the provisions, policies and purposes of the Act, and 
the extent to which the participation is on a basis different from or 
less advantageous than that of other participants.
    2. Rule 17d-3 under the Act provides an exemption from section 
17(d) and rule 17d-1 to permit open-end investment companies to enter 
into distribution arrangements pursuant to rule 12b-1 under the Act. 
Applicants request an order under section 17(d) and rule 17d-1 under 
the Act to permit the Feeder Fund to impose asset-based service and/or 
distribution fees. Applicants have agreed to comply with rules 12b-1 
and 17d-3 as if those rules applied to closed-end investment companies.

Applicants' Condition

    The Feeder Fund agrees that any order granting the requested relief 
will be subject to the following condition:
    Applicants will comply with the provisions of rules 6c-10, 12b-1, 
17d-3, 18f-3 and 22d-1 under the Act, as amended from time to time, or 
replaced as if those rules applied to closed-end management investment 
companies, and will comply with the NASD Conduct Rule 2830, as amended 
from time to time, as if that rule applied to all closed-end management 
investment companies.

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-28951 Filed 11-29-12; 8:45 am]
BILLING CODE 8011-01-P