Structuring Direct Lending Funds: Open-End vs. Closed-End Structures

Recurring Regulatory, Valuation, and ERISA Considerations; Structures to Confront Pervasive Tax Issues

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE webinar with Q&A

Conducted on Wednesday, September 25, 2019

Recorded event now available

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Program Materials

This CLE webinar will examine issues associated with the formation and operation of direct lending funds, including those organized to lend to small and medium-sized businesses, and to certain real estate developers and other RE market participants.


For more than decade, small and medium-sized businesses and real estate bridge financing borrowers have increasingly looked to direct lending funds, as opposed to banks and other traditional lenders, as a source of capital.

Post 2008, in particular, the imposition of additional regulatory requirements on banks in the calculation of their capital and conducting various banking activities was one the strongest historical drivers behind this disintermediation between banks and borrowers.

Conversely, gyrating and unpredictable capital and credit markets in this period have created a dramatic opportunity for many private investment funds to offer this same financing abdicated by many banks. As a result, direct lending funds, a subset of general credit focused investment funds, have become an important part in the mix of strategies to which many institutional investors and family offices desire exposure.

Listen as our authoritative panel examines the structuring options available and considerations relevant to direct lending funds, and the related tax, ERISA and regulatory issues driving many of these alternatives - as well as their key compliance obligations.

The discussion will include "season and sell," corporate blockers, corporation structures, and the role of insurance products, in relation to the foregoing.



Among other matters, the panel will review the following key issues:

  1. Comparing open to closed-end structures, including the following key considerations: liquidity and valuation
    1. Avoiding liquidity mismatches
    2. Frequency of Withdrawal Periods
    3. Length of Notice periods
    4. Gates
    5. Newer strategies
      1. Length of Payout periods
      2. Novel Payout calculations (e.g., disassociate from NAV?)
  2. Most commonly used structures/strategies for US federal income tax issues posed by ECI/FIRPTA/Limitation on Deductions
    1. Historic: standard Domestic LLCs/LPs when all investors are U.S. taxable investors
    2. "Season and sell"
    3. Leveraged U.S. corporate blocker owned by offshore private equity fund invests in or originates U.S. source loans.
    4. Insurance products: insurance policies/IDFs; annuities
    5. Post-Trump tax reform: Are corporate structures, even for US taxable investors, the wave of the future?
  3. Recurring regulatory issues unique to the direct lending funds:
    1. Conflicts
      1. Investment Advisers Act Section 206: Principal Transactions
      2. Conflicts among typical affiliates:
        1. Credit Funds: Originator, Servicer, Principal investment vehicles
        2. RE Related Funds: typical affiliated RE service providers: broker, leasing, finance, etc.
    2. Balancing Securities Act/private placement requirements with marketing for business of the fund


Gelinas, Alex
A.J. A (Alex) Gelinas

Senior Counsel
Sadis & Goldberg

Mr. Gelinas focuses his practice on providing tax advice to investment managers of hedge funds, private equity funds...  |  Read More

Huttler, Steven
Steven Huttler

Sadis & Goldberg

Mr. Huttler has extensive experience in corporate, finance, investment fund and securities matters, including the...  |  Read More

Viola, Daniel
Daniel G. Viola

Sadis & Goldberg

Mr. Viola is the Head of the Firm’s Regulatory and Compliance Group. He structures and organizes...  |  Read More

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