MORGAN LEWIS
LEON E. SALKIN
Associate
+1.215.963.5620
leon.salkin@morganlewis.com
September 29, 2017
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,
regarding the Trust's post-effective amendment no. 96, under the Securities Act
of 1933, as amended (the "1933 Act"), and amendment no. 100, 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 Investec Global Franchise Fund (the "Fund").
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 disclose that the Adviser may recoup waived fees and/or
reimbursed expenses only to the extent that the 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 requested change has been made.
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 29, 2017
Page 2
2. COMMENT. Please disclose 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 requested change has been made.
3. COMMENT. Please confirm supplementally that any adjustments made to the
"Example" to reflect the contractual expense limit are reflected only in
the periods for which the contractual expense limit is expected to
continue.
RESPONSE. The Trust confirms that any adjustments made to the "Example" to
reflect the contractual expense limit are reflected only in the periods for
which the contractual expense limit is expected to continue.
4. COMMENT. In the "Principal Investment Strategies" section, please
characterize the companies that the Adviser believes have strong global
brands or franchises.
RESPONSE. The requested change has been made.
5. COMMENT. Please confirm supplementally that the Fund does not expect to
invest in depositary receipts or securities of emerging market issuers as
part of its principal investment strategies or, alternatively, add
appropriate disclosure.
RESPONSE. The Adviser confirms that it does not currently expect
investments in depositary receipts or securities of emerging market issuers
to be part of the Fund's principal investment strategies.
6. COMMENT. In the "Principal Investment Strategies" section, please further
describe how the Adviser decides which securities to buy for the Fund.
RESPONSE. The Trust respectfully declines to make the requested change
because it believes that, consistent with the requirement of Item 9(b)(2)
of Form N-1A, the section appropriately explains "in general terms" how the
Adviser decides which securities to buy for the Fund.
7. COMMENT. Please confirm that all principal risks of investing in the Fund
are included in the "Principal Risks" section.
RESPONSE. The Adviser confirms that all principal risks of investing in the
Fund are included in the "Principal Risks" section.
Trace Rakestraw, Esq.
September 29, 2017
Page 3
8. 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. General Instruction C.3(a) to Form N-1A states that
"[i]nformation that is included in response to Items 2 through 8 need not
be repeated elsewhere in the prospectus." Accordingly, while information
relating to each of the principal risks has been included in response to
Item 4, disclosure regarding a principal risk has not been included in
response to Item 9 where such disclosure would be substantially similar to
the Item 4 disclosure regarding the risk.
9. COMMENT. In the "Related Performance Data" section:
a. Please confirm supplementally that the Fund has maintained the
records that form the basis for or demonstrate the calculation of the
performance of the Accounts included in the Composite, 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 that form
the basis for or demonstrate the calculation of the performance of the
Accounts included in the Composite, in accordance with Rule 204-2(a)(16)
under the Advisers Act.
b. Please replace "all separate accounts" with "all accounts."
RESPONSE. The requested change has been made.
c. Please confirm supplementally that calculating the "net of fees"
returns using the total annual fund operating expenses after fee
reductions and/or expense reimbursements of the Fund results in
performance no higher than the performance that would have resulted if
the actual fees of the Accounts were used to calculate the "net of
fees" returns.
RESPONSE. The section has been revised such that the "net of fees" returns
are calculated using the actual fees of the Accounts, as opposed to the
Fund's fees and expenses.
d. Please provide the legal basis for showing the performance of
Accounts managed by Clyde Rossouw, the Fund's portfolio manager (the
"Portfolio Manager"), as an employee of Investec Asset Management
(Pty) Ltd. ("IAM Pty"), an affiliate of Investec Asset Management
North America, Inc., the Fund's investment adviser ("IAM NA" or the
"Adviser"), for periods beginning on September 1, 2011 (the "Related
Performance Data").
Trace Rakestraw, Esq.
September 29, 2017
Page 4
RESPONSE. IAM NA and IAM Pty are part of the asset management division (the
IAM division) of the greater Investec group, a global banking, investment,
and financial services group.
The Investec group conducts its business through a dual listed company
("DLC") structure, in the form of Investec Plc, a company listed on the
London Stock Exchange, and Investec Limited ("Investec Ltd"), a company
listed on the Johannesburg Stock Exchange. A DLC structure is an
arrangement by which two separately listed legal entities are combined into
a single economic enterprise through contractual arrangements and
provisions in the constitutions of the two entities. Shareholders
effectively have economic and voting rights as if they held shares in a
single company.
IAM NA is a subsidiary of Investec Asset Management Limited ("IAML"). IAML
is a UK incorporated subsidiary of Investec Plc, which, as described above,
functions as a single economic enterprise with Investec Ltd. Similarly, IAM
Pty is a subsidiary of Investec Asset Management Holdings (Pty) Ltd
("IAMH"). IAMH is a South African incorporated subsidiary of Investec Ltd.
It should be noted that IAML and IAMH (i.e. together, the IAM division)
conduct themselves, through subsidiaries (including IAM NA and IAM Pty), as
a single global investment management firm. Consequently, while the firm in
totality comprises of multiple entities and personnel in a number of
locations, organizationally and from a personnel perspective, the firm's
investment teams operate philosophically and practically as global teams,
who will execute and implement decisions in various domiciles, where they
are authorized to do so. Similarly, these globally focused investment teams
are supported by global operational teams (such as fund accounting,
investment support, finance, HR, IT, legal and compliance, risk, and
related functions) who are based in various locations worldwide.
In the case of the Fund, and the Portfolio Manager in particular, set out
below is the manner in which the global structure described above will be
implemented in relation to IAM NA, and hence the Fund.
In rendering investment advisory services to the Fund, IAM NA relies on a
dual hatting agreement with IAML and IAM Pty, pursuant to which certain
employees at IAML and IAM Pty are permitted to provide portfolio management
services to IAM NA's clients (including the Fund). Under the dual hatting
agreement, such employees and IAML and IAM Pty are considered "associated
persons," as that term is defined in the Advisers Act, of IAM NA, and the
employees are subject to the control and supervision of IAM NA, and to IAM
NA's compliance policies and procedures and code of ethics, in connection
with any services they provide to IAM NA's clients.
Trace Rakestraw, Esq.
September 29, 2017
Page 5
Pursuant to the dual hatting agreement, the Portfolio Manager will be
identified in the Fund's prospectus as the individual primarily responsible
for the day-to-day management of the Fund's portfolio. For periods
beginning on August 12, 2011, the Portfolio Manager was also the only
person who played a significant role in managing the Accounts, which have
investment objectives, policies and strategies that are substantially
similar to those of the Fund. The Related Performance Data is shown for
periods beginning on September 1, 2011 because the Adviser's policy, in
accordance with GIPS(R) composite construction methodology, is to include
accounts in a composite at the beginning of the first full month under
management.
Based on the foregoing facts and for the reasons discussed below, the Trust
and the Adviser believe that the inclusion of the Related Performance Data
in the Fund's prospectus is consistent with the 1940 Act, Form N-1A and
relevant no-action letters.
Section 34(b) of the 1940 Act makes it unlawful for a fund to include in a
registration statement filed with the SEC any untrue statement of a
material fact, or to omit to state any fact necessary in order to make the
information in a registration statement not materially misleading. Section
34(b), however, does not prohibit a fund from including in its registration
statement information that is not required by the applicable registration
form. The general instructions for preparing a registration statement on
Form N-1A expressly contemplate that a fund may include non-required
information. Those instructions state that a fund may include information
in addition to that called for by the applicable items of the form,
provided that "the information is not incomplete, inaccurate, or misleading
and does not, because of its nature, quantity, or manner of presentation,
obscure or impede understanding of" the required information.(1) The Trust
and the Adviser believe that the inclusion of the Related Performance Data
in the Fund's prospectus is consistent with the 1940 Act and the
instructions to Form N-1A.
In BRAMWELL, the Staff permitted a mutual fund to show the prior
performance of an account managed by the mutual fund's portfolio manager,
subject to the following conditions: (i) during the time the other account
was managed by the portfolio manager, the other account had investment
objectives, policies and strategies that were substantially similar to
those of the mutual fund; (ii) the portfolio manager managed no other
comparable accounts during that time; (iii) no other person played a
significant part in achieving the performance of the other account; and
(iv) the performance of the other account is not presented in a misleading
manner and does not obscure or impede understanding of information that is
required to be in the mutual fund's prospectus.(2)
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(1) General Instruction C.3(b) to Form N-1A.
(2) Bramwell Growth Fund (pub. avail. Aug. 7, 1996). Likewise, the Staff has
also permitted mutual funds to include in their prospectuses performance
information for accounts managed by a fund's adviser with investment
objectives, policies, and strategies substantially similar to those of the
fund. SEE, E.G., Nicholas-Applegate Mutual Funds (pub. avail. Aug. 6,
1996).
Trace Rakestraw, Esq.
September 29, 2017
Page 6
The Trust and the Adviser believe that the inclusion of the Related
Performance Data in the Fund's prospectus is consistent with BRAMWELL, as
well as the 1940 Act and the instructions to Form N-1A, because (i) the
Accounts have investment objectives, policies and strategies that are
substantially similar to those of the Fund, (ii) the Portfolio Manager has
managed no other comparable accounts while managing the Accounts, (iii) no
person outside of the Portfolio Manager played a significant part in
achieving the performance of the Accounts during the period for which the
performance is shown, and (iv) the performance of the Accounts will be
presented separately from, and given no greater prominence than, the Fund's
own performance, and the performance of the Accounts will be accompanied by
clear disclosure that it is not indicative of the past or future
performance of the Fund.
As the Staff has indicated, in BRAMWELL, the portfolio manager generated
the performance record at a PRIOR FIRM, whereas the Portfolio Manager
generated the performance record at an affiliate of the Adviser. We do not
believe the fact that the portfolio manager generated the performance
record while at a prior firm was determinative of the Staff's position in
BRAMWELL. In contrast, we believe that satisfaction of the BRAMWELL
conditions set forth above and the principles underlying the Staff's
determination that the presentation and disclosure of the related account
performance was not materially misleading are the appropriate guideposts to
evaluate whether the Fund's inclusion of the Related Performance Data is
permissible. In particular, we do not believe the fact that the Fund's
portfolio manager achieved the performance of the Accounts while
continuously employed at the Adviser's affiliate (as opposed to a prior
firm) causes such disclosure to be in any way misleading to shareholders or
impede shareholder's understanding of the information required to be
included in the Fund's prospectus. In addition, the Accounts reflect all of
the comparable accounts managed by the Portfolio Manager during the period
shown, and there were no comparable accounts of IAM NA or IAM Pty during
the period shown that were not managed by the Portfolio Manager.
Accordingly, there is no risk that the Related Performance Data excludes
any comparable accounts during the period shown (i.e., the Fund and the
Adviser are not cherry-picking the Accounts).
Trace Rakestraw, Esq.
September 29, 2017
Page 7
Separately, the Staff has expressed the view that a fund may include in its
prospectus information concerning the performance of accounts managed by an
affiliate of the fund's adviser where the investment professionals
responsible for the investment operations of the adviser and its affiliate
are virtually identical.(3) We believe that including the Related
Performance Data in the Fund's prospectus is permissible based on the
rationale underlying the GE Funds letter because the investment
professional primarily responsible for the day-to-day management of the
Fund is the same as the investment professional who is primarily
responsible for the day-to-day management of the Accounts and the Accounts
have investment objectives, policies and strategies that are substantially
similar to those of the Fund. Although the adviser entities in GE Funds had
in common investment professionals other than those responsible for the
accounts to be included in the related performance presentation, the Trust
and the Adviser do not believe that all of the investment professionals
responsible for the investment operations of the Adviser and its affiliate
need to be virtually identical in order for the inclusion of the Related
Performance Data in the Fund's prospectus to not be misleading, and to
otherwise be consistent with the 1940 Act and the instructions to Form
N-1A. This is because Fund investors should be principally concerned with
the similarity of the investment professionals primarily responsible for
the day-to-day management of the Fund and the Accounts, especially where
the Adviser and its affiliate can represent that no other investment
professionals at the Adviser or its affiliate are responsible for the
performance of the Fund and the Accounts. In our view, the fact that the
Adviser and its affiliate have other investment professionals who have no
meaningful role with respect to the Fund and the Accounts is not a relevant
factor when determining whether the Fund's inclusion of the Related
Performance Data in its prospectus is consistent with the 1940 Act and Form
N-1A.
Based on the foregoing, the Trust and the Adviser believe that the
inclusion of the Related Performance Data in the Fund's prospectus is
consistent with the 1940 Act, the instructions to Form N-1A, and the
Staff's no-action positions.
10. COMMENT. Please confirm supplementally that the "Business Day" disclosure
complies with Rule 22c-1(b)(1)(iii) under the 1940 Act.
RESPONSE. The Trust believes that the "Business Day" disclosure complies
with Rule 22c-1(b)(1)(iii) under the 1940 Act.
COMMENTS ON THE STATEMENT OF ADDITIONAL INFORMATION
11. COMMENT. Please confirm supplementally that the Fund will consider any
investments in unregistered funds to be illiquid securities.
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(3) SEE GE Funds (pub. avail. Feb. 7, 1997).
Trace Rakestraw, Esq.
September 29, 2017
Page 8
RESPONSE. The Fund does not consider unregistered funds as per se illiquid
securities. Rather, in determining the liquidity of the Fund's investment
in a particular unregistered fund, the Adviser will consider all relevant
information available to the Adviser regarding the Fund's investment in the
unregistered fund, including, but not limited to, whether the unregistered
fund offers daily or weekly liquidity to its investors.
12. COMMENT. If the Fund is a party to a securities lending agreement, please
file the securities lending agreement as an exhibit to the Trust's
registration statement.
RESPONSE. The Fund is not currently a party to a securities lending
agreement.
13. COMMENT. Please confirm that the Fund is not part of the same Fund Complex
as any series of The Advisors' Inner Circle Fund or The Advisors' Inner
Circle Fund II.
RESPONSE. Item 17 of Form N-1A provides that the term "fund complex"
"[m]eans two or more registered investment companies that: (1) Hold
themselves out to investors as related companies for purposes of investment
and investor services; or (2) Have a common investment adviser or have an
investment adviser that is an affiliated person of the investment adviser
of any of the other registered investment companies." Based on the
foregoing, the Trust does not believe that the Fund is part of the same
Fund Complex as any series of The Advisors' Inner Circle Fund or The
Advisors' Inner Circle Fund II.
14. COMMENT. Please consider adding disclosure regarding investments in MLPs
and REITs to the "Taxes" section.
RESPONSE. The requested changes have been made.
* * * * * * * * * * * *
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