The staff of the Division of Investment Management has issued guidance about when to submit adviser/sub-adviser changes to shareholders under multi-manager orders.  The staff indicates that firms generally do not need to submit changes to shareholders in various scenarios where the aggregate fee rate does not change: (1) hiring of the first sub-adviser where the sub-adviser is paid out of the adviser’s fees; (2) hiring of an additional sub-adviser whose fee is the same of a replaced sub-adviser or the assets allocated do not result in an aggregate increase in fees; and (3) fees paid to a sub-adviser results in a corresponding decrease in fees to the adviser.  The staff makes clear that all multi-manager exemptive applications should include the “aggregate fee condition” indicating that any changes in the aggregate fees will be subject to shareholder approval.  This Guidance Update applies to multi-manager structures where the sub-advisers are paid by the adviser and direct pay structures where the fund pays the sub-adviser directly.  

OUR TAKE: Multi-manager orders have increased now that alternative managers have moved into the registered multi-manager and fund-of-funds space.  This Guidance Update gives some concrete guidance that will reduce the number of proxy solicitations.