On October 29, 2026, the Staff of the Division of Investment Management (the “Staff”) of the Securities and Exchange Commission (the “SEC”) issued a no-action letter to Goldman Sachs Asset Management, L.P. (“GSAM”) addressing warehouse arrangements entered into in connection with the launch of registered closed-end funds and business development companies (“BDCs”).  The letter confirms that the Staff will not recommend enforcement action to the SEC under Sections 17(d) and 57(a)(4) of, and Rule 17d-1 under the Investment Company Act of 1940, as amended (the “1940 Act”), if GSAM enters into the warehouse arrangement described in the letter.

Under the proposed arrangement, GSAM would identify investment opportunities for G-X Private Markets (the “Fund”) and present these to an unaffiliated (i.e., neither an affiliated person of the Fund (as defined in Section 2(a)(3) of the 1940 Act (a “first-tier affiliate”), nor an affiliated person of an affiliated person of the Fund (a “second-tier affiliate”)) warehouse party that would have discretion to acquire the investments.  The investments would consist of assets that are consistent with the Fund’s investment objective and strategies. In effecting the warehousing arrangement and any acquisition of investments, GSAM would comply with its policies and procedures relating to investment allocation, as applicable.

The warehouse party would hold the investments until the Fund satisfies a minimum offering requirement and the Fund’s board of trustees approves the Fund’s acquisition of the investments.  The Fund would then acquire all of the investments held by the warehouse party under the arrangement. The Fund would enter into only one facility agreement with one warehouse party.

The Staff’s position is subject to numerous and specific conditions designed to address the provisions of Sections 17(d) and 57(a) of the 1940 Act, which are intended to guard against the types of conflicts of interest and overreaching by affiliates, which these sections were intended to prevent.  Those conditions include that the warehouse party must be unaffiliated with the Fund and investments may not be acquired from affiliates of the Fund (i.e., the investments may not be acquired by the warehouse party from a first- or second-tier affiliate of the Fund) or from accounts managed by GSAM affiliates. This condition likely addresses, indirectly, certain arrangements that some funds have entered into, in an effort to season certain portfolio investments, raise initial capital or for other reasons.

The Fund’s board must also approve the facility agreement (and any related costs and expenses to be borne by the Fund, after receiving a copy of the facility agreement). If the Fund’s board has yet to be constituted, under state law, the Fund’s sole initial trustee has the authority to enter into agreements on the Fund’s behalf, which the fully constituted board would ratify once it has been seated.

In addition, each of GSAM and the Fund’s board must determine that the proposed terms of the acquisition are reasonable and fair to the Fund and do not involve overreaching, and the proposed acquisition is consistent with the best interests of the Fund  and is consistent with the Fund’s investment objective and strategies.  To assist the Fund’s board with these determinations, GSAM will provide the board with reports or other information regarding the investments, including materials in connection with the determinations made by GSAM as described herein, as well as any other information requested by the Board. Further, in connection with the Fund’s purchase of the portfolio investments, GSAM and the board will determine that the financing fees payable by the Fund are reasonable and fair to the Fund and do not involve overreaching of the Fund or its shareholders by any person concerned. In the event that the Board determines not to approve the purchase of the warehoused investments, the Warehouse Party may offer GSAM affiliates or other third parties the opportunity to purchase the investments.

In addition, the purchase price paid by the Fund may not exceed the warehouse  party’s acquisition cost,including financing fees and any taxes and foreign currency related amounts (but less distributions received by the warehouse party (e.g., interest payments or dividend income)). The Fund’s board must approve of the acquisition, and if it does, the Fund must acquire all of the warehoused investments.

The Fund must also disclose detailed information about the investments and the warehousing arrangement in its offering materials, including a schedule of investments (presented in accord with Regulation S-X, Article 12-12), material terms of the warehouse facility agreement, the valuation methodologies for the investments, the treatment of the portfolio investments under Section 18 of the 1940 Act (note that the Staff did not provide any assurances on this particular topic) and the material risks and conflicts of interest.  If the Fund’s board declines to approve the acquisition, the Fund must amend its offering materials to identify the investments it declined to acquire. 

Additionally, if an investment is acquired by the warehouse party in a transaction that would otherwise have required reliance on an existing co-investment exemptive order had the Fund participated instead of the warehouse party, GSAM and the Fund must comply with the conditions of that order as if the Fund had participated in the transaction directly.

The Staff also extended its position to future registered closed-end funds and BDCs.  However, the relief is limited to warehousing arrangements entered into in connection with a fund’s commencement of operations and, for co-investment transactions, is available only to funds that rely on an exemptive order imposing conditions substantially identical to those identified in the letter, namely, Goldman Sachs BDC, Inc., et al. (File No. 812-15711), Release Nos. IC-35559 (April 25, 2025) (notice)and IC-35597 (May 21, 2025) (order).  However, the Staff noted that this includes co-investment exemptive orders that impose conditions substantially identical to the recently revised, more flexible conditions for these types of orders found in FS Credit Opportunities Corp., et al. (File No. 812-15706), Release Nos. IC-35520 (Apr. 3, 2025) (notice) and IC-35561 (Apr. 29, 2025) (order). 

Notably, the Staff’s position in the letter is limited to a warehousing arrangement in connection with the Fund’s commencement of operations. Further, the Staff’s letter includes a number of additional details not summarized herein, and cross-references various aspects of the incoming request letter, which itself includes numerous details regarding the arrangement and the conditions to the requested relief.

The letter provides fund sponsors greater flexibility to launch registered closed-end funds and BDCs with an established portfolio by allowing them to identify and warehouse investments before a fund begins its operations and completes its offering.  Subject to compliance with the Staff’s conditions, this approach can help sponsors avoid having to source and acquire an initial portfolio only after launch.  In addition, the letter can provide some level of comfort to lenders seeking to enter into these types of arrangements.

The GSAM no-action letter relief is available here.