Davis Polk partner Chris Healey was quoted in Mergermarket discussing the potential regulatory hurdles and changes that face retail funds 

Touching on evergreen funds and vehicles registered under the Investment Company Act of 1940, Chris said, “Under the ‘40 Act, if you want a retail fund to participate in investments side-by-side with any affiliate – even another retail fund – you generally need to rely on a co-investment exemptive order.”

Discussing alternative options outside of the ‘40 Act, the article mentions operating company structures are among the latest innovations and works if the vehicle in question is acting as an operator, taking majority stakes, but that this also comes with challenges. “It’s rigid and there’s latent risk that over time purchases and sales of investments looks like trading in securities rather than long-term ownership,” Chris notes.

On the topic of institutional investors participating in retail structures, particularly ones in which the institutional players anchor products launched by large sponsors, Chris mentions “It’s very common. There are limited ways to align incentives without violating the equal treatment requirement.”  

“Private equity’s retail push threatens to upend traditional GP-LP dynamics,” Mergermarket (March 5, 2026) (subscription required)

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