In recent years, we are seeing a “democratization” or “retailization” of private funds through the conversion of private funds to funds that are registered as closed-end investment companies under the Investment Company Act of 1940. Private fund conversions are appealing as a way to enable fund sponsors to expand their investor base by recruiting retail investors to join interval funds, tender offer funds and other types of registered funds. Some sponsors convert long-standing private funds to add a retail investment base, while others may form private funds with an end-goal of establishing registered funds after a brief ramp-up period. This first article in a two-part guest series by Faegre Drinker partner Leila E. Vaughan focuses on the mechanics of private fund conversions to regulated investment companies (RICs), the immediate tax consequences of the conversion, the requirements for the conversion to qualify as a non-taxable transaction and special issues as to certain owners of the converting private fund. The second article will analyze the benefits of RIC tax treatment, the requirements to qualify as a RIC, the consequences of failing to meet those requirements and the types of assets that may pose problems – with suggested solutions – for RIC compliance. See “Retailization Season Is Heating Up: A Private Fund Manager’s Guide to Structuring, Procedures and Fundraising” (Jun. 12, 2025); and “Inherent Obstacles and Promising Pathways to Retailization in the PE Industry” (May 29, 2025).