3(c)(1) Fund
A 3(c)(1) fund is a private fund exemption that avoids Investment Company Act registration by limiting investors (generally) to 100 beneficial owners.
Allocator relevance: Medium–High — affects capacity, eligibility, transfer mechanics, and how the vehicle scales for institutional capital.
Expanded Definition
3(c)(1) is commonly used for smaller vehicles and certain family office or HNW-focused structures. Beneficial owner counting can be complex due to entity investors, feeder structures, and look-through rules. For allocators, the key practical issue is capacity and operational friction: a near-cap fund can create allocation constraints and complicate transfers.
Decision Authority & Governance
Governance includes beneficial owner counting controls, transfer restrictions, GP consent standards, side letter administration, and counsel-managed compliance tracking. Allocators want clarity on who counts, how look-through is applied, and how transfers are handled without discrimination.
Common Misconceptions
- 3(c)(1) is only for “non-institutional” funds.
- Entities always count as one investor.
- 3(c)(1) and 3(c)(7) are interchangeable.
Key Takeaways
- Investor count capacity is a real scaling constraint.
- Counting rules and transfers require strong controls.
- Vehicle choice affects fundraising flexibility.