A March 26 Compliance Reporter article titled “SEC fund lending relief comes with leverage, operational worries” reports that the SEC has made it easier for certain funds to borrow money from their affiliate funds and managers, as they grapple with redemption requests amid COVID-19 market turmoil. In the article, asset management partner George Raine discusses how funds need to do their due diligence in considering the SEC’s relief. “These programs make the most sense when you have a diversified fund group with uncorrelated redemptions, and uncorrelated asset classes,” said George, adding “There are a couple different operational hurdles that make this difficult.” Funds will need to at least review the relief and ensure they have done their due diligence in considering what it offers them, George continued. “The industry is going to be giving a hard look at these programs, though I think the likelihood they will be implemented in practice in the next two months is low.” The SEC’s order sets the expiration date for the relief at June 30.
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