Feeder Funds Must Attach Master Fund Financials
The SEC’s Chief Accountant Office has issued guidance for feeder funds and fund-of-funds that would generally require separate presentation of the financial statements of the underlying funds. The staff believes that feeder funds and fund-of-funds within the same family of funds should attach the underlying funds’ financial statements in order to make a meaningful presentation. The staff also advises feeder funds to include its allocable share of the master fund’s net investment income and expenses in their financial highlights ratios. Conversely, BDCs should consolidate subsidiaries created in order to facilitate investment in portfolio companies.
OUR TAKE: Let the marketing and client service team know that the clients will receive a substantial amount of paper when firms staple the master fund financials to the feeder funds’ shareholder reports.