OCC Permits Bank Ownership of Interests in Certain Private Investment Funds
The OCC determined in Interpretive Letter 940 ("Letter 940") that a national bank may hold limited interests in certain private investment funds for which it serves as investment manager. As manager of the funds the bank received both a management fee and a fee for the performance of each of the funds. For tax reasons, the bank represented that it would be advantageous to U.S. investors in the funds if the bank’s performance compensation were paid as a share of profits rather than as a fee. Indeed, the bank asserted that it would not be competitive with non-bank competitors if it could not receive its performance fees in such a manner. The bank’s interests would be non-voting, would never represent more than 24.99% of the equity of a fund, and the bank would not make any out-of-pocket investments in the funds. The bank also committed not to acquire any ownership interests in funds that hold no real estate or
