Research Outline

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.

Early Findings

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