Davis Polk partner Chris Healey was quoted in Ignites speaking about the SEC’s current expedited co-investment relief framework and its potential expansion to include private equity strategies.

Chris noted, “Although the SEC’s expedited co-investment relief does not explicitly restrict strategies to private credit, the framework only works for the asset class because those strategies avoid the affiliate and principal-transaction restrictions that complicate equity investing under the Investment Company Act.”

The article pointed out that under Section 17(a) of the ‘40 Act, a registered fund generally cannot buy securities from, sell securities to, or otherwise enter into principal transactions with an affiliate. In private equity deals, registered funds typically acquire voting securities, which makes the portfolio company an affiliate and triggers a separate set of affiliated-transaction prohibitions.

“You can get into a private equity deal under the FS template, but you can’t really operate it,” Chris said. “That’s why you don’t see PE strategies in ‘40 Act funds.”

“Private equity co-investments remain functionally blocked unless the SEC expands the relief to address those structural issues,” he added.

Chris continued, saying, “The current co-investment relief only addresses joint transactions where you and your affiliate sit on the same side of the table. But private equity also involves principal transactions, and the relief today does not touch that.”

He also noted, “Though [SEC Commissioner] Uyeda acknowledged that considerations around expanding co-investment relief beyond private credit are alive within the SEC, regulators will have to prioritize the pending applications before considering expanding the relief into a new iteration.”

“SEC Considers Widening Access to PE in CEFs,” Ignites (November 25, 2025) (subscription required) 

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