Vic Fleischer offers a very interesting analysis of the 40 Act and tax code aspects of the Blackstone IPO. Bottom Line?
For the structure to work, then, what Blackstone does has to be active services for 40 Act purposes (we're an asset management/advisory firm, not a pass-through who lets you invest in a pool of securities) but passive for tax purposes. I'm not saying the structure doesn't work - quirks in the rules often allow this sort of regulatory arbitrage -- just that it seems a little aggressive. I don't think I've ever seen an entity go public with such uncertain tax treatment.
