Morgan, Lewis & Bockius LLP MORGAN LEWIS
1701 Market Street
Philadelphia, PA 19103-2921
Tel: 215.963.5000
Fax: 215.963.5001
www.morganlewis.com
May 14, 2015
FILED AS EDGAR CORRESPONDENCE
Marianne Dobelbower, Esq.
U.S. Securities and Exchange Commission
Division of Investment Management
100 F. Street, N.E.
Washington, DC 20549
Re: Winton Diversified Opportunities Fund N-2 Filing (File No. 811-23026)
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Dear Ms. Dobelbower:
On behalf of our client, Winton Diversified Opportunities Fund (the "Fund"),
this letter responds to the comments provided by the staff (the "Staff") of the
Securities and Exchange Commission via letter regarding the Fund's registration
statement on Form N-2 filed with the SEC on January 28, 2015 (the "Registration
Statement"). Below, we have briefly summarized the Staff's comments and
questions, followed by our responses. Capitalized terms not defined herein
should be given the meaning provided in the Registration Statement.
COMMENTS ON THE PROSPECTUS
With respect to the Subsidiary:
1. COMMENT: Disclose that the Fund complies with the provisions of the
Investment Company Act of 1940 governing investment policies (Section 8)
and capital structure and leverage (Section 18) on an aggregate basis with
the Subsidiary.
RESPONSE: The requested changes have been made.
2. COMMENT: Disclose that each investment adviser to the Subsidiary complies
with provisions of the Investment Company Act relating to investment
advisory contracts (Section 15) as an investment adviser to the Fund under
Section 2(a) (20) of the Investment Company Act. The investment advisory
agreement between the Subsidiary and its investment adviser is a material
contract that should be included as an exhibit to the registration
statement.
RESPONSE: Under the heading "Management of the Subsidiary, the Fund
discloses that "The services that the Adviser provides to the Subsidiary
are similar to those that the Adviser provides to the Fund, and the terms
of the advisory agreement between the Adviser and the Subsidiary are
similar to those of the advisory agreement between the Adviser and the
Fund."The Fund complies with Section 15(a) of the 1940 Act and the
Subsidiary has the same investment adviser as the Fund. The Subsidiary is
not a registered investment company under the 1940 Act and therefore is not
required to enter into an advisory agreement that complies with Section
15(a) of the 1940 Act. While the Subsidiary is not required to enter into
an advisory agreement that complies with Section 15(a) of the 1940 Act, the
Subsidiary's advisory agreement complies with various requirements of
Section 15(a). The Fund confirms that the investment advisory agreement
between the Subsidiary and the Adviser will be included as an exhibit to
the Registration Statement.
3. COMMENT: Disclose that the Subsidiary complies with provisions relating to
affiliated transactions and custody (Section 17). Identify the custodian of
the Subsidiary.
RESPONSE: The requested changes have been made.
4. COMMENT: Disclose whether the Fund has received a private letter ruling
from the Internal Revenue Service stating that undistributed income derived
from the Subsidiary is qualifying income, and, if the Fund has not received
a private letter ruling, its basis for determining that such undistributed
income is qualifying income, such as an opinion of counsel.
RESPONSE: The requested changes have been made.
5. COMMENT: Disclose, as appropriate, whether any of the Subsidiary's
principal investment strategies or principal risks constitute principal
investment strategies or risks of the Fund. The principal investment
strategies and principal risk disclosures of a fund that invests in a
subsidiary should reflect aggregate operations of the fund and the
subsidiary.
RESPONSE: The Subsidiary is designed to implement one or more of the
principal investment strategies of the Fund. It is not designed to
replicate the Fund's principal investment strategies as a whole. The Fund
believes that the prospectus discloses the principal investment strategies
or principal risks of the Subsidiary that constitute principal investment
strategies or principal risks of the Fund. The Fund also believes that the
principal investment strategies and principal risk disclosures reflect
aggregate operations of the Fund and the Subsidiary.
6. COMMENT: Confirm that the financial statements of the Subsidiary will be
consolidated with those of the Fund.
RESPONSE: The Fund confirms that the financial statements of the Subsidiary
will be consolidated with those of the Fund.
7. COMMENT: Confirm in correspondence that: (a) the Subsidiary's expenses
will be included in the Fund's prospectus fee table; (b) the Subsidiary and
its board of directors will agree to designate an agent for service of
process in the United States; (c) the Subsidiary and its board of directors
will agree to inspection of the Subsidiary's books and records by the SEC
staff; and (d) the Subsidiary's board of directors will sign the Fund's
registration statement.
RESPONSE: The Fund confirms that (a) the Subsidiary's expenses are included
in the Fund's prospectus fee table; (b) the Subsidiary and its board of
directors will agree to designate an agent for service of process in the
United States; (c) the Subsidiary and its board of directors will agree to
inspection of the Subsidiary's books and records by the SEC staff; and (d)
the Subsidiary's board of directors will sign the final pre-effective
amendment to the Fund's registration statement.
Prospectus Summary (pages 4-11):
8. COMMENT: Under the caption "Investment Objective," the prospectus states
that "[t]he investment strategy of the Fund is to invest globally long and
short, using leverage, in a diversified range of liquid instruments."
[Emphasis added.] Use a different term than "diversified," as that term is
defined in section 5(b)(1) of the Investment Company Act of 1940.
RESPONSE: The Fund is classified as a "diversified company" under Section 5
of the 1940 Act and believes that the use of the term "diversified" in
describing its portfolio of investments is appropriate and not misleading.
Accordingly, the Fund respectfully declines to make the requested change.
9. COMMENT: Under the caption "Risk Profile," add the disclosure that
"[t]here can be no assurance that the targets will be met and these targets
are not a guarantee or prediction of the Fund's actual losses or
volatility." Generally, under the discussion of the annualized volatility
target, explain whether the Fund will seek to increase the volatility in
the Fund if it is too low, and if so, how that would be achieved. Explain
how the Fund intends to "target" monthly losses and disclose that the Fund
may not be successful in limiting monthly losses.
RESPONSE: The caption "Risk Profile" and the related disclosures regarding
volatility targets have been removed from the prospectus. The Program
utilizes various measures to manage and monitor risk, including volatility,
and the Adviser believes that the current disclosure more accurately
reflects the manner in which the Program will be applied to the Fund. The
manner in which the Program operates has not changed since the Registration
Statement was filed.
Fee Table (page 12):
10. COMMENT: The prospectus states that "[t]he Fund does not currently charge
a repurchase fee. However, the Fund may charge a repurchase fee of up to
2.00%, which the Fund would retain to help offset non-de minimis estimated
costs related to the repurchase incurred by the Fund, directly or
indirectly, as a result of repurchasing shares, thus allocating estimated
transaction costs to the shareholder whose shares are being repurchased."
Include the repurchase fee in the fee table. The fact that such fees are
not currently imposed may be described briefly in a note to the table.
RESPONSE: The requested change has been made.
Investment Strategies (page 14):
11. COMMENT: Describe with more specificity how the Fund intends to allocate
its investments among the asset types described.
RESPONSE: As disclosed in the prospectus, the Adviser uses an automated
computer-based investment system to create different investment programs,
and the program used by the Fund constructs the Fund's portfolio based on
its forecasts. In response to the staff's comment, the following disclosure
has been added to the second paragraph under the sub-heading "Investment
Objective, Strategies and Policies - Investment Strategies": "The amount
invested in any given instrument at any given time is thus determined by
this automated computer-based process and is constrained by various risk
and liquidity considerations."
12. COMMENT: The prospectus states that the Fund may invest in "cash equities."
Explain whether this means that the "equities" will be purchased long
(i.e., without margin).
RESPONSE: The Fund may purchase equities with or without margin. Therefore,
the word "cash" has been deleted in each instance it appears before the
word "equities."
* * * * * * * * * * * *
I hereby acknowledge on behalf of, and with the express authority granted by,
the Fund that: (i) the Fund 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 Fund'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
Fund 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 Fund.
If you have any questions, need any additional information or would like any
clarification, please contact me at (215) 963-5598.
Very truly yours,
/s/ David W. Freese
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David W. Freese