(Reuters) The US Securities and Exchange Commission’s (SEC) fund of funds proposals potentially open the door to a shakeup in the Business Development Company (BDC) market. Under the existing guidelines, regulated funds are prohibited from owning more than 3% of another fund’s outstanding voting securities, a limitation that has restricted activist funds from having a big influence on the sector. “If you can’t own more than 3% in a BDC then you don’t have the natural consequences of activism that improves governance,” said one fund manager. “Activism is capitalism doing its job.”
SEC reforms open door to BDC market shakeup
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