MORGAN LEWIS
LEON E. SALKIN
Associate
+1.215.963.5620
leon.salkin@morganlewis.com
September 21, 2016
FILED AS EDGAR CORRESPONDENCE
Trace Rakestraw, 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 Mr. Rakestraw:
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
August 30, 2016, regarding the Trust's post-effective amendment no. 70, under
the Securities Act of 1933, as amended (the "1933 Act"), and amendment no. 74,
under the Investment Company Act of 1940, as amended (the "1940 Act"), to its
registration statement filed with the SEC pursuant to Rule 485(a) under the 1933
Act (the "Amendment") with respect to the SGA International Equity Fund, SGA
International Equity Plus Fund, SGA International Small Cap Equity Fund and SGA
Global Equity Fund (each, a "Fund" and together, the "Funds"). 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. Please confirm supplementally that the Adviser may recoup waived
fees and/or reimbursed expenses only to the extent that a Fund's Total
Annual Fund Operating Expenses (not including excluded expenses) are below
the contractual expense limit in effect (i) at the time of the fee waiver
and/or expense reimbursement and (ii) at the time of the recoupment.
RESPONSE. The Trust confirms that the Adviser may recoup waived fees and/or
reimbursed expenses only to the extent that a Fund's Total Annual Fund
Operating Expenses (not including excluded expenses) are below the
contractual expense limit in effect (i) at the time of the fee waiver
and/or expense reimbursement and (ii) at the time of the recoupment.
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, PA 19103-2921 T +1.215.963.5000
United States F +1.215.963.5001
Trace Rakestraw, Esq.
September 21, 2016
Page 2
2. COMMENT. Please clarify that the Adviser may recoup waived fees and/or
reimbursed expenses only if the recoupment would be within three years of
the fee waiver and/or expense reimbursement.
RESPONSE. The prospectus indicates that the Adviser may recover all or a
portion of its prior fee waivers or expense reimbursements made during the
three year period preceding any point that Total Annual Fund Operating
Expenses (not including excluded expenses) are below the contractual
expense limit. In light of the foregoing, the Trust believes that the
prospectus includes appropriate disclosure with respect to this matter.
3. COMMENT. Please consider clarifying that the instruments listed in the
first paragraph of each Fund's "Principal Investment Strategies" section
are classified as equity securities for purposes of the Fund's 80%
investment policy.
RESPONSE. The requested change has been made.
4. COMMENT. Please confirm that any derivatives included as investments that
satisfy a Fund's 80% investment policy will be valued for purposes of the
Fund's 80% investment policy at their market, as opposed to notional,
value.
RESPONSE. The Adviser has confirmed that a Fund will generally use the
market values of derivatives for purposes of its 80% investment policy, but
a Fund may use the notional values of derivatives for purposes of its 80%
investment policy in appropriate circumstances. For example, if a
derivative creates an investment exposure to an issuer in an amount equal
to the mark-to-market value of the derivative, a Fund would typically
expect to use that value for purposes of its 80% investment policy. On the
other hand, if a derivative creates an investment exposure equivalent to a
cash investment in the underlying issuer equal to the derivative's notional
amount, a Fund would typically expect to use that amount for purposes of
its 80% investment policy.
5. COMMENT. Please delete the reference to "speculative purposes" in the
"Derivatives Risk" paragraph of each Fund's "Principal Risks" section if
each Fund will use derivatives only for hedging purposes.
RESPONSE. No changes have been made in response to this comment because, as
disclosed in each Fund's "Principal Investment Strategies" section, each
Fund may use swaps for non-hedging purposes.
6. COMMENT. In each Fund's "Principal Investment Strategies" section, please
provide a plain english explanation of the phrase "bottom-up stock
selection."
RESPONSE. The requested change has been made.
Trace Rakestraw, Esq.
September 21, 2016
Page 3
7. COMMENT. In each Fund's "Principal Investment Strategies" section, please
consider (i) describing the factors incorporated in the proprietary model
that the Adviser uses to identify investments for the Fund, and (ii)
clarifying how the Fund's potential sells are identified systematically.
RESPONSE. The requested changes have been made.
8. COMMENT. In each Fund's "Principal Investment Strategies" section, please
consider describing the limits on the Fund's sector, country and regional
exposures.
RESPONSE. The requested changes have been made.
9. COMMENT. In the "ETFs Risk" paragraph of each Fund's "Principal Risks"
section, please clarify whether the Fund may invest in active ETFs.
RESPONSE. The requested changes have been made.
10. COMMENT. Please confirm that the fees and expenses incurred indirectly by
each Fund as a result of its investment in shares of one or more ETFs are
not expected to exceed 0.01 percent of the average net assets of the Fund
during the current fiscal year, or alternatively, add an "Acquired Fund
Fees and Expenses" subcaption to the Fund's "Annual Fund Operating
Expenses" table and disclose in the subcaption the fees and expenses
expected to be incurred indirectly by the Fund as a result of investment in
shares of one or more acquired funds during the current fiscal year.
RESPONSE. The fees and expenses incurred indirectly by each Fund as a
result of investment in shares of one or more acquired funds are not
expected to exceed 0.01 percent of the average net assets of the Fund
during its current fiscal year.
11. COMMENT. Please include a discussion of each of the "Principal Risks"
disclosed pursuant to Item 4 of Form N-1A in the response to Item 9 of Form
N-1A.
RESPONSE. The requested change has been made.
12. COMMENT. In the "Related Performance Data of the Adviser" section:
a. Please confirm that the Adviser has maintained the records that form the
basis for or demonstrate the calculation of the performance of the accounts
included in the Composites, in accordance with Rule 204-2(a)(16) under the
Investment Advisers Act of 1940, as amended (the "Advisers Act").
RESPONSE. The Adviser confirms that it has maintained the records in
accordance with Rule 204-2(a)(16) under the Advisers Act.
b. Please explain supplementally why the exclusion of accounts with market
values of less than $100,000 from each Composite does not make the
performance presentations misleading.
Trace Rakestraw, Esq.
September 21, 2016
Page 4
RESPONSE. The Adviser believes that the exclusion of accounts with a market
value of less than $100,000 from the Composites does not make the
performance presentations misleading because such accounts are not
representative of the Composite strategies.
c. Please clarify the time period for which an account is included in a
Composite.
RESPONSE. The section has been revised to state that an account is included
in a Composite from the first full month of management and removed after
the last full month of management.
d. Please present the performance of the Adviser's International Equity
Composite as if its significant cash flow policy had not been in effect.
RESPONSE. The requested change has been made.
COMMENTS ON THE STATEMENT OF ADDITIONAL INFORMATION
13. COMMENT. In connection with the disclosure that the Funds are permitted to
invest in master limited partnerships ("MLPs"):
a. Please add a "Deferred Income Tax Expense" line item to each Fund's
"Annual Fund Operating Expenses" table in the Prospectus.
RESPONSE. The requested changes have not been made because each Fund
intends to qualify and elect to be treated as a regulated investment
company under the Code and, as such, does not expect to pay any income tax.
b. In the "Description of Permitted Investments" section, please disclose
that MLPs may be subject to energy sector risk.
RESPONSE. The requested change has been made.
c. In the "Taxes" section, please clarify that if a Fund invests in MLPs,
its shareholders may receive corrected Forms 1099.
RESPONSE. The requested change has been made.
14. COMMENT. Please confirm that the Funds are permitted to invest in each of
the fixed income securities described in the "Description of Permitted
Investments" section.
RESPONSE. The Adviser confirms that the Funds are permitted to invest in
each of the fixed income securities described in the "Description of
Permitted Investments" section.
Trace Rakestraw, Esq.
September 21, 2016
Page 5
15. COMMENT. In the "Description of Permitted Investments" section, please
disclose that bank loans (i) may be subject to extended trade settlement
periods and (ii) may not be considered securities, and may, therefore, not
have the protections afforded by the federal securities laws.
RESPONSE. The requested changes have been made.
* * * * * * * * * * * *
I hereby acknowledge on behalf of, and with the express authority granted by,
the Trust that: (i) the Trust 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 Trust'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 Trust 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 Trust. If you have any questions,
need any additional information or would like any clarification, please contact
me at (215) 963-5620.
Very truly yours,
/s/ Leon Salkin
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Leon Salkin