By: Nate Eisenberg
Product Manager, Private Debt
August 12, 2025
Private credit continues to draw capital at an unprecedented rate, and now managers are exploring new structures to broaden their investor base. One option that is gaining momentum is the 40 Act fund.
At Allvue, we’re seeing a notable rise in market interest around 40 Act vehicles. For firms looking to tap into the wealth management & retail markets, this structure offers a regulatory-compliant path to expand access beyond traditional institutional LPs. But the opportunity also comes with a new set of operational and compliance requirements.
In this blog, we’ll explore what drives interest in 40 Act funds, how they differ from traditional structures, and what infrastructure considerations are essential to making them effective. We’ll also share how Allvue’s Compliance solution is helping private credit managers stay ahead of the curve.
What is a 40 Act Fund and Why Now?
A “40 Act fund” refers to a pooled investment vehicle regulated under the U.S. Investment Company Act of 1940. These structures are publicly registered and fall into two broad categories: open-end (e.g., mutual funds) and closed-end (e.g., interval, evergreen and tender offer funds).
Historically associated with equities or fixed income, 40 Act structures have evolved to accommodate alternative strategies through vehicles like Business Development Companies (BDCs) and interval funds.
The appeal for private credit managers is clear:
- Increased fundraising flexibility compared to traditional private drawdown funds.
- Faster capital formation via continuously offered or semi-liquid structures.
- Tax advantages through 1099 reporting vs. K-1s.
However, entering this space means adapting to a new set of rules and investor expectations, particularly in terms of compliance and transparency.
What Makes 40 Act Fund Operationally Unique
Compared to private fund structures, 40 Act funds come with more prescriptive governance and operational demands. For firms accustomed to LP-based vehicles, this shift necessitates rethinking their infrastructure.
Here are a few of the most critical differences:
- Liquidity Monitoring: Interval and tender offer funds must allow for periodic redemptions (often quarterly) and therefore need infrastructure to track and manage liquidity risk in real-time.
- Valuation Discipline: Daily or monthly NAV calculations demand rigorous, auditable valuation processes and pricing oversight.
- Concentration & Eligibility Screening: These funds often come with portfolio restrictions, including sector-based screens (e.g., no “sin investments” like firearms or tobacco) and limitations on asset concentrations.
- Retail Transparency & Reporting: Investors expect more frequent, digestible reporting, with stricter regulatory oversight and standardized forms, such as the 1099.
For these reasons, entering the 40 Act space isn’t just a marketing or capital-raising decision, it’s a compliance and operational transformation.
What to Look for in a Technology Partner
Given the demands of 40 Act compliance, fund managers must evaluate their systems with certain criteria in mind. Key capabilities to prioritize include:
- Configurable compliance rule engines that can handle asset-level restrictions, concentration thresholds, and eligibility tests.
- Integrated data infrastructure that connects investment, compliance, and accounting workflows to support NAV, audit, and board-level reporting.
- Real-time exposure tracking across legal entities, strategies, and sleeves.
- Workflow tools for monitoring valuation, pricing overrides, and portfolio restrictions.
- Scalability to support new fund structures, investor types, and growing product complexity.
These needs extend beyond basic portfolio monitoring. They require solutions that are purpose-built for the regulatory complexity of public-facing alternative funds.
