As the Trump administration’s deregulatory agenda takes shape, BDCs and closed-end funds could see significant rule changes.

Both investment vehicles are featured in the INVEST Act, which was passed by the House of Representatives in December 2025 to ease regulatory burdens, expand access to capital for start-ups, and broaden investor participation in private markets.

“It includes a number of measures that have provisions beneficial to closed end funds and BDCs, and it got through the House with really strong bipartisan approval — a rare thing these days,” said Anna Pinedo, partner at law firm Mayer Brown.

Specifically, she noted that the INVEST Act will exempt funds that invest in BDCs from including acquired fund fees and expenses (AFFE) calculations in their prospectuses.

“Addressing AFFE would likely lead to broader institutional ownership of BDCs and perhaps inclusion (once again) of BDCs in indices,” Pinedo said. “Now, BDCs are almost exclusively a retail product.”

There are also provisions to change anti-pyramiding rules, which would address aggregation of ownership interests in funds by hedge funds or private funds. “This would make it harder for activist hedge funds to target closed-end funds,” she said.

Looking Ahead

With the midterms approaching in November and the potential shift in Congressional control they could bring, there may be a relatively small legislative window within which Republicans can act. As a result, legal experts expect to see more regulatory overhauls in 2026.

“There’s a whole industry out there that is looking forward to a deregulatory period, and Trump wants to do it, so we are going to get it,” said Russell Sacks, partner at law firm King & Spalding. “Against the backdrop of regulators signaling openness to change and dialogue with stakeholders, financial companies are asking, ‘What does regulation look like for me in the best-case scenario?’”

He sees expanded retail access to private markets as the main priority for regulatory change.

In May 2025, SEC chair Paul Atkins proposed dropping the 15 percent limit for closed-end funds holding private assets. Sacks believes this could be taken a step further by changing the SEC’s Rule 22e-4, or liquidity management rule, which prohibits mutual funds from carrying more than 15 percent of illiquid assets. Because the rule is part of the Investment Company Act of 1940, it would require legislative action to change, Sacks noted.

One possible obstacle to deregulation within the asset management industry is another key campaign priority of the Trump administration: redesigning the architecture regulating the cryptocurrency industry. This could slow down other aspects of the regulatory agenda, Sacks said.

“The asset management industry that would very much like to be part of a significant deregulatory period but has to get in line behind the establishment and implementation of a crypto regulatory architecture,” he said. “That’s everybody’s priority in the government, because that is personal priority, and a campaign promise, of the president.”