There's really no reason to allow US Tax Exempts into a non-US fund unless that fund uses debt and generates UBTI which creates a tax liability for US Tax Exempts. If there is no debt financing, then the US Tax Exempts can invest in the US based fund. If the fund does generate UBTI, the fund will often allow US Tax Exempts into the offshore fund. There could be other SEC regulations that keep them from offering the fund to any US investor.
Ok JVM. Thanks for your replies. Your last sentence is very important: do you know what other 'SEC regulations' could apply to non-US funds that accept at time non-US investors and 'tax-exempt US investors'?
From my experience, the offering regulations are not overly burdensome but I believe they can become complex depending on particular situations.
Do you think that if an Offshore fund that has non-US investors and tax-exempt US investors only can have an issue with the SEC if the fund invests in US securities, or earns dividends, or...?