SEC Issues Co-Investments No-Action Letter for Open-End Funds

On April 27, the SEC’s Division of Investment Management issued a no-action letter to J.P. Morgan Investment Management Inc. (JPMIM) if JPMIM mutual funds and ETFs participate in co-investment transactions alongside affiliated funds and accounts, subject to the conditions of JPMIM’s existing co-investment exemptive order. This relief will enable different funds or accounts to invest side-by-side in private deals historically not available to open-end funds. The no-action relief effectively authorizes open-end funds to participate, subject to their 15% liquidity restrictions, in co-investment transactions for the first time.

The no-action relief is limited to co-investment orders with conditions substantially identical to those in the first co-investment order granted by the SEC to FS Credit in April 2025.  A condition of this line of exemptive orders requires the fund board to approve co-investment transactions with the potential for heightened conflicts of interest. The board approval requirements can be met through a committee of at least three independent directors.

For open-end fund directors, the change will require approvals of transactions that may be time-sensitive.  Directors will not be responsible for evaluating or negotiating deals, but they will be responsible for overseeing allocations and conflicts of interest.

Click here for the SEC No-Action Letter.

Click here for the Incoming Letter.

Click here to view a client alert from Dechert regarding the no-action relief.