Morningstar Finds Two-Thirds of BDCs Omit 2024 Performance Fee Disclosures
Morningstar analysis finds two-thirds of unlisted business development companies omitted 2024 performance fee disclosures in prospectuses, leaving investors unaware of true expense ratios. It highlights Blue Owl Credit Income and Blackstone Private Credit both recorded 3.2% adjusted expense ratios despite prospectus projections of 1.8% and 3.3% respectively.
1. Fee Disclosure Omissions
Analysis of SEC filings shows that two-thirds of unlisted business development companies did not include any performance fee details in their 2024 prospectuses. This practice leaves investors without clear expectations of total fund expenses and incentive fee structures.
2. Blue Owl vs Blackstone Comparison
In the year examined, Blue Owl Credit Income projected a 1.8% adjusted expense ratio when omitting incentive fees, whereas Blackstone Private Credit estimated 3.3% including performance fees. Both funds nonetheless reported identical 3.2% adjusted expense ratios, highlighting the predictability of incentive fees despite inconsistent disclosures.
3. Investor Implications
Omitting performance fee estimates can obscure a fund’s risk profile and true cost to investors, making it difficult to compare vehicles on a like-for-like basis. Consistent incentive fee disclosures are crucial for evaluating manager risk tolerance and potential returns.