The US Securities and Exchange Commission's fund of funds proposals potentially open the door to a shake-up in the Business Development Company market. Under the existing guidelines, regulated funds are prohibited from owning more than 3% of another fund's outstanding voting securities, a limitation that has restricted activist funds from having a big influence on the sector. "If you can't own more than 3% in a BDC then you don't have the natural consequences of activism that improves governance," said one fund manager. "Activism is capitalism doing its job."
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