Morgan, Lewis & Bockius LLP Morgan Lewis
1701 Market Street Counselors at Law
Philadelphia, PA 19103
Tel: 215.963.5000
Fax: 215.963.5001
David W. Freese
215-963-5862
dfreese@morganlewis.com
FILED AS EDGAR CORRESPONDENCE
July 25, 2014
Karen Rossotto, Esq.
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, D.C. 20549
Re: The Advisors Inner Circle Fund III 485(a) Filing (File Nos.333-192858
and 811-22920)
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Dear Ms. Rossotto:
On behalf of our client, The Advisors' Inner Circle Fund III (the "Trust"), this
letter responds to the comments you provided on behalf of the staff (the
"Staff") of the Securities and Exchange Commission (the "SEC") via telephone on
May 27, 2014, regarding the Trust's post-effective amendment no. 2, under the
Securities Act of 1933, as amended (the "1933 Act"), and amendment no. 6, under
the Investment Company Act of 1940, as amended (the "1940 Act"), to its
registration statement filed with the SEC on April 11, 2014 pursuant to Rule
485(a) under the 1933 Act, for the purpose of adding the Rothschild Larch Lane
Alternatives Fund (the "Fund") as an additional series of the Trust (the
"Amendment"). Below, we have briefly summarized your comments and questions,
followed by our responses based on information provided by the Adviser.
Capitalized terms not defined herein should be given the meaning provided in the
Amendment.
COMMENTS ON THE PROSPECTUS
1. COMMENT. In the "Principal Investment Strategies" section, please include
"plain English" explanations of the following terms: "long," "short,"
"neutral," "long-biased" and "long/short."
RESPONSE. The requested changes have been made with respect to neutral,
long-biased and long-short. The Registrant respectfully believes that the
terms "long" and "short" are plain English and commonly understood by
investors.
2. COMMENT. If the Fund will invest in foreign securities as part of its
principal investment strategy, including the securities of emerging market
issuers, please add appropriate disclosure in the "Principal Investment
Strategies" section.
RESPONSE. The requested change has been made.
3. COMMENT. (a) If the Fund will invest in "uncovered" short sales as part of
its principal investment strategy, please add appropriate disclosure in the
"Principal Investment Strategies" section. (b) If the Fund will "cover" its
position in short sales, please disclose the manner in which the Fund will
do so in the "Principal Risks" section.
RESPONSE. (a) The Registrant notes that the "Principal Investment
Strategies" and "More Information about the Fund's Investment Objective and
Principal Investment Strategies - Principal Investment Strategies" sections
each disclose that the Fund may engage in short sales and that the
"Principal Risks" and "More Information about Risk" sections disclose that,
when engaging in short sales, the Fund sells securities that it does not
own and discusses the related risks of doing so. Accordingly, the
Registrant believes that such sections disclose that the Fund may engage in
"uncovered" short sales, and respectfully declines to make the requested
change.
(b) The Registrant notes that the "More Information about Risk" section
discloses that the Fund will borrow the security sold short and is
obligated to replace the borrowed security by purchasing the security at
the market price at the time of replacement. Accordingly, the Registrant
believes that such section discloses the manner in which the Fund will
cover its short sales, and respectfully declines to make the requested
change. The Registrant notes that the Fund's Statement of Additional
Information contains additional disclosure with respect to the Fund's use
of short sales.
4. COMMENT. In the second-to-last paragraph of the "Principal Investment
Strategies" section, please disclose the market capitalization range of
common stock in which the Fund will invest. If the Fund will invest in
small- and mid-capitalization securities as part of its principal
investment strategy, please add appropriate risk disclosure in the
"Principal Risks" section.
RESPONSE. The requested changes have been made.
5. COMMENT. In the second to last paragraph of the "Principal Investment
Strategies" section, please disclose the credit quality ratings applicable
to the Fund's fixed income investments.
RESPONSE. The disclosure has been revised to note that the Fund principally
invests in investment grade fixed income instruments.
6. COMMENT. Will the Fund also use maturity or duration as a form of
measurement for the instruments in which it invests? If so, please revise
the disclosure accordingly.
RESPONSE. The Adviser and Sub-Advisers utilize a broadly diversified
investment approach in selecting fixed income securities for the Fund that
will result in holdings ranging from those with short maturities and
durations to those with longer-term maturities and durations. While the
Adviser and Sub-Advisers monitor the maturity and duration of the Fund's
fixed income investments, they are each one of many factors that influence
investment decisions, and the Adviser and Sub-Advisers do not target any
particular weighted average maturity or overall duration for the Fund's
portfolio as a part of the Fund's principal investment strategy. In
response to the comment, the first sentence of this paragraph has been
revised to reflect that the Fund may invest in fixed income securities of
any maturity or duration.
7. COMMENT. If the Fund will invest in a particular market sector (e.g., the
technology sector) as part of its principal investment strategy, please add
appropriate risk disclosure in the "Principal Risks" section.
RESPONSE. The Fund will not invest in any particular market sector as a
principal investment strategy.
8. COMMENT. If the Fund will invest in high yield bonds as part of its
principal investment strategy, please add appropriate risk disclosure in
the "Principal Risks" section.
RESPONSE. The Adviser has confirmed that the Fund will not invest in high
yield fixed income securities as a principal investment sttrategy at this
time, although it may do so in the future.
9. COMMENT. Please confirm supplementally that the Fund's expenses relating
to short sales are included in the "Other Expenses" line item of the fee
table.
RESPONSE. A line item disclosing "Dividend and Interest Expenses on
Securities Sold Short" has been added to the Fund's fee table, and the
Fund's expenses disclosed in the fee table have been adjusted accordingly.
10. COMMENT. If the six portfolio managers described in the "Investment
Adviser and Portfolio Managers" section are members of a committee, please
only provide information for the five persons with the most significant
responsibility for the day-to-day management of the Fund's portfolio.
RESPONSE. Instruction 2 to Item 5(b) of Form N-1A provides that "[i]f more
than five persons are jointly and primarily responsible for the day-to-day
management of the Fund's portfolio, the Fund NEED ONLY provide information
for the five persons with the most significant responsibility for the
day-to-day management of the Fund's portfolio" (emphasis added).
Instruction 2 does not prohibit a fund from disclosing more than five
portfolio managers, but instead allows a fund to limit its disclosure to
five portfolio managers. The Registrant respectfully submits that it does
not wish to limit disclosure to five portfolio managers, and, therefore, no
changes have been made in response to this comment.
11. COMMENT. If the Fund will make direct investments in physical commodities,
please add appropriate disclosure to the third paragraph of the "More
Information about the Fund's Investment Objective and Principal Investment
Strategies" section.
RESPONSE. The Adviser has confirmed that the Fund does not intend currently
to make direct investments in physical commodities. Rather, the Fund
intends to invest in derivatives and other instruments that provide
exposure to commodities.
12. COMMENT. Please move the last two sentences of the first paragraph under
the sub-heading "More Information about Risk - Commodity-Linked
Derivatives" to the "Principal Risks" section of the Prospectus.
RESPONSE. The requested change has been made.
13. COMMENT. If the Fund's policies and procedures with respect to
circumstances under which the Fund discloses its portfolio holdings are
available through a website, please disclose this web address under the
heading "Information about Portfolio Holdings."
RESPONSE. The Fund's policies and procedures with respect to circumstances
under which the Fund discloses its portfolio holdings are summarized in the
SAI but are not made available through a website. Accordingly, no revisions
have been made in response to the comment.
14. COMMENT. Please move the last paragraph in the "Investment Adviser and
Portfolio Managers" section regarding the basis of the Board's approval of
the investment advisory and sub-advisory agreements to a new fourth
paragraph in the same section. Please also provide, to the extent possible,
the period covered by the annual or semi-annual report that will discuss
the basis for the Board's approval of the Fund's investment advisory
agreement.
RESPONSE. The last paragraph in the "Investment Adviser and Portfolio
Managers" section has been moved to a new fourth paragraph in the same
section. The period covered by the annual or semi-annual report that will
discuss the basis for the Board's approval of the Fund's investment
advisory agreement will be provided in a subsequent post-effective
amendment to the Trust's registration statement, once the information is
available.
COMMENTS ON THE STATEMENT OF ADDITIONAL INFORMATION
15. COMMENT. In the "Investment Limitations" section, please revise the
narrative disclosure with respect to the fundamental investment policy on
concentration to clarify that industrial revenue bonds (i.e., those bonds
that are issued by municipalities to finance non-governmental projects) and
municipal securities with payments of principal or interest backed by the
revenue of a specific project will be counted by the Fund as investments in
the industry to which they are related, and thus subject to the 25%
industry concentration limit.
RESPONSE. The Trust has revised the narrative such that the following
phrase has been deleted: "such as with respect to investments in
obligations issued or guaranteed by the U.S. Government or its agencies and
instrumentalities, or tax-exempt obligations of state or municipal
governments and their political subdivisions."
16. COMMENT. In the "Trustees and Officers of the Trust" section under the
heading entitled "Board Compensation," please disclose the retirement
compensation, if any, payable by the Trust to the persons who serve as
Trustees of the Trust.
RESPONSE. The Registrant has not implemented a retirement plan for its
trustees, and, therefore, has not included any related disclosure under the
heading entitled "Board Compensation."
17. COMMENT. In the "Portfolio Holdings" section, please list other entities
that may selectively receive information regarding the Fund's portfolio
holdings, if any.
RESPONSE. The requested change has been made.
* * * * * * * * * * * *
I hereby acknowledge on behalf of, and with the express authority granted by,
the Registrant that: (i) the Registrant is responsible for the adequacy and
accuracy of the disclosure in its registration statement; (ii) SEC staff
comments or changes to disclosure in response to staff comments in the
registration statement reviewed by the staff do not foreclose the SEC from
taking any action with respect to the registration statement; and (iii) if, to
the Registrant's knowledge, an inquiry or investigation is currently pending or
threatened by the SEC and if the SEC subsequently, in order to protect its
investigative position, so requests, the Registrant will not assert SEC Staff
comments with respect to the inquiry or investigation as a defense in any
proceeding initiated by the SEC under the federal securities laws of the United
States.
As indicated in the SEC's June 24, 2004 release regarding the public release of
comment letters and responses, you are requesting such acknowledgements from all
companies whose filings are being reviewed and that this request and these
acknowledgements should not be construed as suggesting that there is an inquiry
or investigation or other matter involving the Registrant.
If you have any questions, need any additional information or would like any
clarification, please contact me at (215) 963-5862.
Very truly yours,
/s/ David W. Freese
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David W. Freese