Authored By: Scott Siemens and Michael C. Aronstein, Antiquity

In our, “Understanding Fees: Beyond the Headlines and into the Footnotes” article, we gave an overview and checklist of the various fees and expenses that are typical in Evergreen funds. In this article we will focus on the “other” fees.

While management and performance fees dominate discussions, Evergreen funds frequently include a range of additional charges that can erode returns if not carefully monitored. These "other" fees stem from operational necessities, structural complexities, and regulatory requirements, and they vary widely depending on the fund's design, whether it's a single-manager or multi-manager setup, and its use of leverage.

Unlike the core fees, these are often passed through as expenses rather than direct incentives, but they can add up significantly over the fund's indefinite lifespan. Investors should review the fund's expense ratio or total expense ratio (TER) in the prospectus to understand the full burden, as some funds cap these costs or offer reimbursements to remain competitive.

Administrative and Operational Expenses: The Day-to-Day Costs

These encompass a broad category of ongoing charges for fund administration, including accounting, auditing, legal and compliance services, custodian fees, transfer agent costs, and reporting obligations. In Evergreen funds, which require frequent NAV calculations for subscriptions and redemptions, these expenses can range from 0.1% to 0.5% of assets annually, depending on fund size and complexity. For BDCs and semi-liquid structures, regulatory filings under the Investment Company Act of 1940 amplify these costs. Investors should check if the fund imposes caps on reimbursable expenses (e.g., 0.25% of NAV) and whether uncapped items like extraordinary legal fees could lead to surprises.

Leverage-Related Expenses: Interest and Borrowing Costs

Evergreen funds often employ leverage to enhance returns, but this introduces interest expenses on borrowed funds, which are typically borne by investors. Rates can fluctuate with market benchmarks like SOFR, adding 1-3% or more to the TER in leveraged vehicles like BDCs. These costs are not "fees" per se but direct expenses that reduce net returns, especially in rising interest rate environments. Scrutinize the fund's leverage ratio and debt terms to assess if the potential upside justifies the added drag—funds with high leverage may amplify volatility without proportional benefits.

Acquired Fund Fees and Expenses (AFFE): The Multi-Manager Markup

In multi-manager Evergreen private equity or credit funds, which invest in underlying vehicles, AFFE represents the layered fees from those sub-funds, including their management and performance charges. This can add 0.5-2% annually, effectively creating a "fee-on-fee" structure that inflates overall costs. Pure secondaries or fund-of-funds models tend to have higher AFFE, while co-investment-heavy funds may mitigate this by accessing deals on a no-fee basis. Investors in such structures should evaluate the net-of-fees performance projections to ensure the diversification benefits outweigh the compounded expenses.

Organizational and Offering Expenses: Upfront and Amortized Charges

These cover the initial setup costs, such as legal structuring, registration, and marketing, often amortized over 3-5 years and charged to the fund. In new Evergreen launches, they might amount to 0.1-0.5% of committed capital initially. Some funds absorb these internally, while others pass them through, potentially diluting early returns. Look for amortization schedules and caps to avoid overpaying for perpetual structures that benefit long-term holders disproportionately.

Subscription and Redemption Fees: Liquidity-Related Penalties

To manage cash flows in semi-liquid Evergreen funds, one-time subscription fees (1-2% of investment) may apply for onboarding, covering administrative processing. Redemption fees (0.5-2%, sometimes declining over time) discourage frequent withdrawals and protect remaining investors from liquidity strains. These are more common in interval or tender-offer funds and can be waived for certain share classes. Assess these against the fund's liquidity terms—high fees might signal underlying illiquidity risks.

Checklist Guidance: When evaluating other fees, review the prospectus for a breakdown of the TER, including caps on administrative expenses and leverage costs; compare AFFE in multi-manager funds to single-manager peers; confirm amortization of organizational costs and any subscription/redemption charges; and model their long-term impact on net returns under various scenarios.

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