[Federal Register Volume 83, Number 191 (Tuesday, October 2, 2018)]
[Notices]
[Pages 49604-49606]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-21374]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Investment Company Act Release No. 33255; File No. 812-14899]


Hedge Fund Guided Portfolio Solution, et al.

September 26, 2018.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice.

-----------------------------------------------------------------------

    Notice of an application under section 6(c) of the Investment 
Company Act of 1940 (the ``Act'') for an exemption from sections 
18(a)(2), 18(c) and 18(i) of the Act, and for an order pursuant to 
section 17(d) of the Act and rule 17d-1 thereunder.

Applicants: Hedge Fund Guided Portfolio Solutions (the ``Fund''), 
Grosvenor Capital Management, L.P. (the ``Advisor''), and GRV 
Securities LLC (the ``Distributor'') (together, the ``Applicants'').

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'') with varying 
sales loads and to impose asset-based service and/or distribution fees.

Filing Dates: The application was filed on April 25, 2018 and amended 
on June 14, 2018, August 22, 2018 and September 6, 2018.

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 should be received by the Commission by 
5:30 p.m. on October 20, 2018 and should be accompanied by proof of 
service on applicants, in the form of an affidavit or, for lawyers, a 
certificate of service. Pursuant to rule 0-5 under the Act, hearing 
requests should state the nature of the writer's interest, any facts 
bearing upon the desirability of a hearing on the matter, 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: Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE, Washington, DC 20549-1090; Applicants, 900 North Michigan 
Avenue, Suite 1100, Chicago, IL 60611.

FOR FURTHER INFORMATION CONTACT: Rochelle Kauffman Plesset, Senior 
Counsel, at (202) 551-6840 or David Marcinkus, Branch Chief, at (202) 
551-6882 (Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION: The following is a summary of the 
application. The complete application may be obtained via the 
Commission's website 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 Fund is a Delaware statutory trust that is registered under 
the Act as a non-diversified, closed-end management investment company. 
The Fund's objective is to seek absolute returns with low to moderate 
volatility and with minimal correlation to the global equity and fixed 
income markets while preserving capital. The Fund intends to pursue its 
investment objective through a multi-manager, multi-strategy program of 
investment in a group of limited liability private investment vehicles 
(each, an ``Investment Fund''), managed by third-party investment 
management firms (each, an ``Investment Manager''). The Fund seeks to 
implement its investment objective by investing in Investment Funds 
that will invest both long and short, in a wide range of 
``alternative'' investment strategies.
    2. The Advisor, an Illinois limited partnership, is registered as 
an investment adviser under the Investment Advisers Act of 1940. The 
Advisor serves as an investment adviser to the Fund.
    3. The Distributor is registered with the Commission as a broker-
dealer under the Securities Exchange Act of 1934 (the ``1934 Act'') and 
will act as the distributor of the Fund. The Distributor is under 
common control with the Advisor and is an affiliated person, as defined 
in Section 2(a)(3) of the 1940 Act, of the Advisor.
    4. Applicants seek an order to permit the Fund to issue multiple 
classes of Shares, each having its own fees and expense structure and 
to impose asset-based distribution and/or service fees and early 
withdrawal charges.
    5. Applicants request that the order also apply to any other 
registered closed-end management investment company that conducts a 
continuous offering of its shares, existing now or in the future, for 
which the Advisor or the Distributor, its successors, or any entity 
controlling, controlled by, or under common control with the Advisor or 
the Distributor or its successors,\1\ acts as investment adviser or 
distributor, respectively, and which provides periodic liquidity with 
respect to its Shares through tender offers conducted in compliance 
with rule 13e-4 under the 1934 Act.\2\
---------------------------------------------------------------------------

    \1\ A successor in interest is limited to an entity that results 
from a reorganization into another jurisdiction or a change in the 
type of business organization.
    \2\ The 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.
---------------------------------------------------------------------------

    6. The Fund initially will issue a single class of Shares (the 
``Initial Class''). Shares will be offered on a continuous basis at net 
asset value per share. The Shares will be sold only to person who are 
``accredited investors,'' as defined in Regulation D under the 
Securities Act of 1933. The Fund, as a closed-end investment company, 
does not continuous redeem Shares as does an open-end management 
investment company. The Shares will not be 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 ever develop 
for the Shares.
    7. If the requested relief is granted, the Fund may offer multiple 
classes of Shares, in addition to the Initial Class. Because of the 
different distribution fees, service fees, and any other class expenses 
that may be attributable to the different classes, the net income 
attributable to, and any dividends payable on, each class of Shares may 
differ from each other from time to time.

[[Page 49605]]

    8. Applicants state that, from time to time, the Fund's board of 
Trustees (the ``Board,'' and each member a ``Trustee'') may create and 
offer additional classes of Shares, or may vary the characteristics 
described of the Initial Class Shares, including without limitation, in 
the following respects: (1) The amount of fees permitted by different 
distribution plans or different service fee arrangements; (2) voting 
rights with respect to a distribution and service plan of a class; (3) 
different class designations; (4) the impact of any class expenses 
directly attributable to a particular class of Shares allocated on a 
class basis as described in the Application; (5) differences in any 
dividends and net asset values per Share resulting from differences in 
fees under a distribution and service plan or in class expenses; (6) 
any sales load structure; and (7) any conversion features, as permitted 
under the Act.
    9. Applicants state that the Initial Fund does not currently intend 
to impose an early withdrawal charge. However, in the future a Fund may 
impose an early withdrawal charge on shares submitted for repurchase 
that have been held less than a specified period. The Fund may waive 
the early withdrawal charge for certain categories of shareholders or 
transactions to be established from time to time. Applicants state that 
each Fund will apply the early withdrawal charge (and any waivers or 
scheduled variations of the early withdrawal charge) uniformly to all 
shareholders in a given class and consistently with the requirements of 
rule 22d-1 under the Act as if the Fund was an open-end investment 
company.
    10. Applicants state that, in order to provide a limited degree of 
liquidity to shareholders, the Fund will from time to time offer to 
repurchase Shares pursuant to written tenders by shareholders in 
accordance with Rule 13e-4 under the 1934 Act (``Repurchases''). 
Repurchases of the Fund's Shares will be made at such times, in such 
amounts, and on such terms as may be determined by the Fund's Board in 
its sole discretion. In determining whether the Fund should offer to 
Repurchase Shares, the Board will consider a variety of operational, 
business and economic factors. The Advisor expects to ordinarily 
recommend that the Board authorize the Fund to offer to Repurchase 
Shares from shareholders quarterly with March 31, June 30, September 30 
and December 31 valuation dates.
    11. Applicants represent that any asset-based service and/or 
distribution fees will comply with the provisions of Rule 2341 of the 
Rules of the Financial Industry Regulatory Authority (``FINRA Rule 
2341'') as if that rule applied to the Fund.\3\ Applicants also 
represent that the 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.\4\ As is required for open-end funds, the Fund 
will disclose its expenses in shareholder reports, and describe any 
arrangements that result in breakpoints in or eliminations of sales 
loads in its prospectus.\5\ In addition, Applicants will comply with 
applicable enhanced fee disclosure requirements for fund of funds, 
including registered funds of hedge funds.\6\
---------------------------------------------------------------------------

    \3\ Any references to FINRA Rule 2341include any successor or 
replacement rule that may be adopted by the Financial Industry 
Regulatory Authority (``FINRA'').
    \4\ In all respects other than class-by-class disclosure, the 
Fund will comply with the requirements of Form N-2.
    \5\ 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).
    \6\ Fund of Funds Investments, Investment Company Act Rel. Nos. 
26198 (Oct. 1, 2003) (proposing release) and 27399 (Jun. 20, 2006) 
(adopting release). See also Rules 12d1-1, et seq. of the Act.
---------------------------------------------------------------------------

    12. The Fund and the Distributor will 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 Fund and the Distributor. The Fund or the Distributor will also 
contractually require that any other distributor of the Fund's Shares 
comply with such requirements in connection with the distribution of 
Shares of the Fund.
    13. The Fund will allocate all expenses incurred by it among the 
various classes of Shares based on the net assets of the Fund 
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 the 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 Fund will comply with the provisions of rule 18f-3 under the Act as 
if it were an open-end investment company.
    14. The Fund does not intend to offer any exchange privilege or 
conversion feature, but any such privilege or feature introduced in the 
future will comply with rule 11a-1, rule 11a-3, and rule 18f-3 as if 
the Fund were an open-end investment company.

Applicants' Legal Analysis

Multiple Classes of Shares

    1. Section 18(a)(2)(A) and (B) makes it unlawful for a registered 
closed-end investment company to issue a senior security that is a 
stock unless (a) immediately after such issuance it will have an asset 
coverage of at least 200% and (b) provision is made to prohibit the 
declaration of any distribution, upon its common stock, or the purchase 
of any such common stock, unless in every such case such senior 
security has at the time of the declaration of any such distribution, 
or at the time of any such purchase, an asset coverage of at least 200% 
after deducting the amount of such distribution or purchase price, as 
the case may be. Applicants state that the creation of multiple classes 
of shares of the Funds may violate section 18(a)(2) because the Funds 
may not meet such requirements with respect to a class of shares that 
may be a senior security.
    2. Section 18(c) of the Act provides, in relevant part, that a 
registered 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 Fund may be prohibited by 
section 18(c), as a class may have priority over another class as to 
payment of dividends because shareholders of different classes would 
pay different fees and expenses.
    3. 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 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.
    4. 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 or regulation under the Act, if and to the extent such

[[Page 49606]]

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(a)(2), 18(c) and 18(i) to 
permit the Fund to issue multiple classes of Shares.
    5. Applicants submit that the proposed allocation of expenses 
relating to distribution 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 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 Fund will comply with the provisions of 
rule 18f-3 as if it were an open-end investment company.

Early Withdrawal Charge

    1. Applicants state that the early withdrawal charges they intend 
to impose are functionally similar to contingent deferred sales loads 
imposed by open-end investment companies under rule 6c-10 under the 
Act. Rule 6c-10 permits open-end investment companies to impose 
contingent deferred sales loads, subject to certain conditions. 
Applicants note that rule 6c-10 is grounded in policy considerations 
supporting the employment of contingent deferred sales loads where 
there are adequate safeguards for the investor and state that the same 
policy considerations support imposition of early withdrawal charges in 
the interval fund context. In addition, Applicants state that early 
withdrawal charges may be necessary for the Fund's Distributor to 
recover distribution costs. Applicants represent that any early 
withdrawal charge imposed by a Fund will comply with rule 6c-10 under 
the Act as if the rule were applicable to closed-end investment 
companies. Each Fund will disclose early withdrawal charges in 
accordance with the requirements of Form N-1A concerning contingent 
deferred sales loads.

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 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, 
which they believe will resolve any concerns that might arise in 
connection with a Fund financing the distribution of its shares through 
asset-based service and/or distribution fees.
    3. For the reasons stated above, Applicants submit that the 
exemptions requested are necessary and appropriate in the public 
interest and are consistent with the protection of investors and 
purposes fairly intended by the policy and provisions of the 1940 Act. 
Applicants also believe that the requested relief meets the standards 
for relief in section 17(d) of the 1940 Act and rule 17d-1 thereunder.

Applicants' Condition

    Applicants agree 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, 22d-1, and where applicable, 11a-3 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 FINRA 
Rule 2341, 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.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21374 Filed 10-1-18; 8:45 am]
 BILLING CODE 8011-01-P