[Federal Register Volume 85, Number 10 (Wednesday, January 15, 2020)]
[Notices]
[Pages 2465-2468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-00451]
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SECURITIES AND EXCHANGE COMMISSION
[Investment Company Act Release No. 33743; 812-15081]
Goldman Sachs Real Estate Diversified Income Fund, et al.
January 9, 2020.
AGENCY: Securities and Exchange Commission (``Commission'').
ACTION: Notice.
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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, under sections 6(c) and 23(c) of
the Act for an exemption from rule 23c-3 under the Act, and for an
order pursuant to section 17(d) of the Act and rule 17d-1 under the
Act.
Summary of Application: Applicants request an order to permit certain
registered closed-end management investment companies to issue multiple
classes of shares and to impose asset-based service and distribution
fees, and early withdrawal charges (``EWCs'').
Applicants: Goldman Sachs Real Estate Diversified Income Fund and
Goldman Sachs Credit Income Fund (the ``Initial Funds''), Goldman Sachs
Asset Management, LP (the ``Adviser''), and Goldman Sachs & Co. LLC
(the ``Distributor'').
Filing Dates: The application was filed on December 11, 2019.
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 February 3, 2020, and should be accompanied by proof of
service on the 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
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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: 200 West Street, New
York, NY 10282.
FOR FURTHER INFORMATION CONTACT: Edward J. Rubenstein, Senior Special
Counsel, at (202) 551-6854, or Kaitlin C. Bottock, Branch Chief, at
(202) 551-6825 (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 for 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 Goldman Sachs Real Estate Diversified Income Fund (the ``GS
Real Estate Fund'') is a Delaware statutory trust that is registered
under the Act and will operate as a diversified, closed-end management
investment company. The GS Real Estate Fund will operate as an
``interval fund'' pursuant to rule 23c-3 under the Act and intends to
continuously offer its shares.
2. The Goldman Sachs Credit Income Fund (the ``GS Credit Fund'') is
a Delaware statutory trust that is registered under the Act and will
operate as a diversified closed-end management investment company. The
GS Credit Fund will operate as an ``interval fund'' pursuant to rule
23c-3 under the Act and intends to continuously offer its shares.
3. The Adviser is a Delaware limited liability partnership
registered as an investment adviser under the Investment Advisers Act
of 1940. The Adviser will serve as investment adviser to the Initial
Funds.
4. The Distributor is registered with the Commission as a broker-
dealer under the Securities Exchange Act of 1934 (the ``Exchange
Act''), and will act as the distributor of the Initial Funds.
5. Applicants seek an order to permit the Initial Funds to issue
multiple classes of shares, each having its own fee and expense
structure, and to impose asset-based distribution and service fees, and
EWCs.
6. Applicants request that the order also apply to any continuously
offered registered closed-end management investment company that has
been previously organized or that may be organized in the future for
which the Adviser or the Distributor or any entity controlling,
controlled by, or under common control with the Adviser or the
Distributor, or any successor in interest to any such entity,\1\ acts
as investment adviser or principal underwriter, respectively, and which
operates as an interval fund pursuant to rule 23c-3 under the Act or
provides periodic liquidity with respect to its shares pursuant to rule
13e-4 under the Exchange Act (each, a ``Future Fund'' and together with
the Initial Fund, the ``Funds'').\2\
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\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\ Any Fund relying on this relief in the future will do so in
compliance with the terms and conditions of the application.
Applicants represent that each entity presently intending to rely on
the requested relief is listed as an applicant.
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7. Each Initial Fund will make a continuous public offering of its
shares. Applicants state that additional offerings by any Fund relying
on the order may be on a private placement or public offering basis.
Shares of the Funds will not be listed on any securities exchange, nor
quoted on any quotation medium. The Funds do not expect there to be a
secondary trading market for their shares.
8. If the requested relief is granted, the GS Real Estate Fund
expects to offer at least eight classes of shares and the GS Credit
Fund expects to offer at least five classes of shares. The Initial
Funds may also offer additional classes of shares in the future, with
each class having its own fee and expense structure.
9. Applicants state that, from time to time, the Funds may create
additional classes of shares, the terms of which may differ from the
initial class pursuant to and in compliance with rule 18f-3 under the
Act.
10. Applicants state that shares of a Fund may be subject to a
repurchase fee at a rate of no greater than 2% of the shareholder's
repurchase proceeds 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. Any repurchase fee will apply equally to
all classes of shares of a Fund, consistent with section 18 of the Act
and rule 18f-3 thereunder. Further, applicants represent that to the
extent a Fund determines to waive, impose scheduled variations of, or
eliminate any repurchase fee, it will do so consistently with the
requirements of rule 22d-1 under the Act as if the repurchase fee were
a CDSL (defined below) and as if the Fund were an open-end investment
company and the Fund's waiver of, scheduled variation in, or
elimination of, any such repurchase fee will apply uniformly to all
shareholders of the Fund regardless of class.
11. Applicants state that the Initial Funds will adopt a
fundamental policy to repurchase a specified percentage of its shares
(no less than 5% and not more than 25%) at net asset value on a
periodic basis. Such repurchase offers will be conducted pursuant to
rule 23c-3 under the Act.\3\ Each Future Fund will likewise adopt a
fundamental investment policy in compliance with rule 23c-3 and make
periodic repurchase offers to its shareholders, or provide periodic
liquidity with respect to its shares pursuant to rule 13e-4 under the
Exchange Act. Any repurchase offers made by the Funds will be made to
all holders of shares of each such Fund.
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\3\ Applicants submit that rule 23c-3 and Regulation M under the
Exchange Act permit an interval fund to make repurchase offers to
repurchase its shares while engaging in a continuous offering of its
shares pursuant to rule 415 under the Securities Act of 1933.
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12. Applicants represent that any asset-based service and/or
distribution fees for each class of shares will comply with the
provisions of FINRA Rule 2341 (``Sales Charge Rule'').\4\ Applicants
also represent that each 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, each Fund
will disclose its expenses in shareholder reports, and describe any
arrangements that result in breakpoints in or elimination 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\
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\4\ Any reference to the Sales Charge Rule includes any
successor or replacement rule that may be adopted by the Financial
Industry Regulatory Authority (``FINRA'').
\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.
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13. Each of the Funds will comply with any requirements that the
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Commission or FINRA may adopt 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 each Fund. In
addition, each Fund will contractually require that any distributor of
the Fund's shares comply with such requirements in connection with the
distribution of such Fund's shares.
14. Applicants state that each Fund may impose an EWC on shares
submitted for repurchase that have been held less than a specified
period and may waive the EWC for certain categories of shareholders or
transactions to be established from time to time. Applicants state that
each of the Funds will apply the EWC (and any waivers or scheduled
variations of the EWC) uniformly to all shareholders in a given class
and consistently with the requirements of rule 22d-1 under the Act as
if the Funds were open-end investment companies.
15. Each Fund operating as an interval fund pursuant to rule 23c-3
under the Act may offer its shareholders an exchange feature under
which the shareholders of the Fund may, in connection with the Fund's
periodic repurchase offers, exchange their shares of the Fund for
shares of the same class of (i) registered open-end investment
companies or (ii) other registered closed-end investment companies that
comply with rule 23c-3 under the Act and continuously offer their
shares at net asset value, that are in the Fund's group of investment
companies (collectively, ``Other Funds''). Shares of a Fund operating
pursuant to rule 23c-3 that are exchanged for shares of Other Funds
will be included as part of the amount of the repurchase offer amount
for such Fund as specified in rule 23c-3 under the Act. Any exchange
option will comply with rule 11a-3 under the Act, as if the Fund were
an open-end investment company subject to rule 11a-3. In complying with
rule 11a-3, each Fund will treat an EWC as if it were a contingent
deferred sales load (``CDSL'').
Applicants' Legal Analysis
Multiple Classes of Shares
1. Section 18(a)(2) of the Act makes it unlawful for a closed-end
investment company to issue a senior security that is a stock unless
certain requirements are met. 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 a Fund proposed herein may
result in Shares of a class having ``priority over [another] class as
to . . . payment of dividends,'' and being deemed a ``senior
security,'' because shareholders of different classes may pay different
distribution fees, different shareholder services fees, and any other
expense. Accordingly, applicants state that the creation of multiple
classes of Shares of a Fund with different fees and expenses may be
prohibited by section 18(c).
3. Section 18(i) of the Act provides, in relevant part, 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 multiple classes of
shares of the Funds 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 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
Funds 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 a Fund to facilitate the distribution of its securities and
provide investors with a broader choice of shareholder services.
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 each Fund will comply with the provisions of
rule 18f-3 as if it were an open-end investment company.
Early Withdrawal Charges
1. Section 23(c) of the Act provides, in relevant part, that no
registered closed-end investment company shall purchase securities of
which it is the issuer, except: (a) On a securities exchange or other
open market; (b) pursuant to tenders, after reasonable opportunity to
submit tenders given to all holders of securities of the class to be
purchased; or (c) under other circumstances as the Commission may
permit by rules and regulations or orders for the protection of
investors.
2. Rule 23c-3 under the Act permits an interval fund to make
repurchase offers of between five and twenty-five percent of its
outstanding shares at net asset value at periodic intervals pursuant to
a fundamental policy of the interval fund. Rule 23c-3(b)(1) under the
Act permits an interval fund to deduct from repurchase proceeds only a
repurchase fee, not to exceed two percent of the proceeds, that is paid
to the interval fund and is reasonably intended to compensate the fund
for expenses directly related to the repurchase.
3. Section 23(c)(3) provides that the Commission may issue an order
that would permit a closed-end investment company to repurchase its
shares in circumstances in which the repurchase is made in a manner or
on a basis that does not unfairly discriminate against any holders of
the class or classes of securities to be purchased.
4. Applicants request relief under section 6(c), discussed above,
and section 23(c)(3) from rule 23c-3 to the extent necessary for the
Funds to impose EWCs on shares of the Funds submitted for repurchase
that have been held for less than a specified period.
5. Applicants state that the EWCs they intend to impose are
functionally similar to CDSLs imposed by open-end investment companies
under rule 6c-10 under the Act. Rule 6c-10 permits open-end investment
companies to impose CDSLs, subject to certain conditions. Applicants
note that rule 6c-10 is grounded in policy considerations supporting
the employment of CDSLs where there are adequate safeguards for the
investor and state that the same policy considerations support
imposition of EWCs in the interval fund context. In addition,
applicants state that EWCs may be necessary for the distributor to
recover distribution costs. Applicants represent that any EWC
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imposed by the Funds will comply with rule 6c-10 under the Act as if
the rule were applicable to closed-end investment companies. The Funds
will disclose EWCs in accordance with the requirements of Form N-1A
concerning CDSLs.
Asset-Based Service and 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 the extent necessary to permit the Funds to impose asset-
based service and 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 distribution fees.
3. For the reasons stated above, applicants submit that the
exemptions requested under section 6(c) are necessary and appropriate
in the public interest and are consistent with the protection of
investors and the purposes fairly intended by the policy and provisions
of the Act. Applicants further submit that the relief requested
pursuant to section 23(c)(3) will be consistent with the protection of
investors and will insure that applicants do not unfairly discriminate
against any holders of the class of securities to be purchased.
Finally, applicants state that the Funds' imposition of asset-based
service and distribution fees is consistent with the provisions,
policies, and purposes of the Act and does not involve participation on
a basis different from or less advantageous than that of other
participants.
Applicants' Condition
Applicants agree that any order granting the requested relief will
be subject to the following condition:
Each Fund relying on the order 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, as if those rules applied
to closed-end management investment companies, and will comply with the
Sales Charge Rule, 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.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-00451 Filed 1-14-20; 8:45 am]
BILLING CODE 8011-01-P