US Act 40 Funds
To determine the number of funds that are regulated by the Securities and Exchange Commission (SEC) under the Investment Company Act of 1940 (Act 40 Funds) and how many assets under management (in US dollars) these funds have. Out of these funds, those that are in distress and are poorly managed and hold illiquid securities (securities of private companies) should be identified and highlighted.
The Investment Company Act of 1940
- Most funds, or investment companies as they are legally referred to, are regulated under the Investment Company Act of 1940.
- In fact, all funds registered with the Securities and Exchange Commission (SEC) must comply with the Investment Company Act of 1940, as it is one of the two primary acts of Congress that regulates investment companies, in addition to the Securities Act of 1933. However, certain investment companies may be exempted from registration, either because they do not fall under the definition of an "investment company" or because they request an exemption under sections 3(c)(1) or 3(c)7 of the Investment Company Act of 1940.
The Number of Act 40 Funds
- The SEC's EDGAR database has a list of all active investment companies that are registered with the SEC, and of the funds that the companies manage. This list has been provided in the Act 40 Funds tab of the attached spreadsheet.
- There are 2,242 registered investment companies in that list, and the companies manage a total of 44,895 funds. Therefore, there are 44,895 different Act 40 Funds in the US.
Types of Investment Companies
Funds Required to Sell Illiquid Securities
- Filtering the spreadsheet to only show type 30 investment companies shows that there are 1,567 investment companies managing 41,340 funds that have to rebalance their portfolio if the value of illiquid securities in it exceeds 15% of the total.
Funds Holding Illiquid Securities
- Due to time constraints, only one fund holding illiquid assets has been identified. It is the Hartford Capital Appreciation HLS Fund, Series IA fund (ticker: HIACX). This fund has been marked in green in the Act 40 Funds tab of the spreadsheet.
- The Hartford Capital Appreciation HLS Fund, Series IA fund is managed by Hartford Series Fund Inc., a division of Hartford Funds Management Group, Inc. Hartford Funds Management Group, Inc. is an affiliate of Wellington Management Company LLP.
- The portfolio managers for HIACX are Gregg R. Thomas and Tom S. Simon.
- The illiquid securities HIACX currently holds include 16,619 shares of Airbnb Inc., 85,350 shares of Social Finance, Inc. (SoFi), and 29,504 shares of Magic Leap, Inc.
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