Multi-Manager Structure without Sub-Advisor Fee Disclosure
A fund firm is seeking exemptive relief to operate a multi-manager fund without disclosing the specific fees paid to underlying sub-advisers. Instead, the fund would disclose the aggregate fees paid to the adviser and the aggregate fees paid to all unaffiliated sub-advisers. The applicant argues that the relief would benefit shareholders because underlying sub-advisers would be willing to offer fee rates lower than they would otherwise offer to the public. Other conditions include ongoing Board review of advisor profitability and disclosure of any subadvisory changes.
OUR TAKE: We agree with the applicants that requiring full disclosure of all sub-advisory fees really doesn’t meaningfully help shareholders make an investment decision and that such disclosure slows down investment decisions in multi-manager structures. However, investors could still find the fees if the sub-advisor prepares Part 2 of Form ADV, which requires fee disclosure.