b'08Investment Vehicle Comparison (Continued)Open-EndTarget Date Closed-EndBusiness DevelopmentIntervalTender Offer Funds Funds Funds Companies (BDCs) Funds FundsManagementInvestors pay the open-endTend to have average ex- Base management fee andBase management fee and incentive feesBase management fee andBase management fee and in-Fees mutual funds current NAVpense ratio fees. incentive fees on incomeon realized capital gains and income (if CEF,incentive fees on incomecentive fees on realized capital plus any initial sales load. Average fees may be aroundonly. only on income).only. gains and income (if CEF, only 0.32%. Base management feegenerally 1.25%Base management fee on income).annually on net assets.generally 2% annually on netBase management feesIncentive fees based on income12.5% ofassets.11.5% with total expenses net investment income, subject to a hurdleIncentive fees based on22.5%.rate and catch-up, and 12.5% capital gainsincometypically 12.515%.fee on realized gains, net of realized and unrealized losses.LiquidityRepurchase or private resale. ETFs may be resold on anGenerally through sales onPublic BDCsShares are listed on anPeriodic repurchase (i.e.,Periodic repurchase through Events exchange. an exchange. exchange.quarterly, semiannually ora tender offer on a discretion-and Fees annually) of 5%25% of out- ary basis. If repurchases are Mutual funds may be resoldPrivate BDCExchange listing; limited term;standing shares at mandatedoversubscribed, exceeding the through a private sale, facili- and periodic repurchases, IPO, or unwindingintervals, following a lockupamount authorized, the fund tated by a broker-dealer. of the fund.period. iiIf repurchases aremay accept additional tenders Non-traded BDCsOften conduct periodicoversubscribed, exceedingon a pro rata basis.repurchases. the amount authorized, theAn early repurchase fee may fund must accept additional Discretionary repurchases, generallytenders on a pro rata basis. be charged as a percentage of 2.5%5% of outstanding shares. the tendered amount.May establish a repurchase fee, not to exceed 2% of the proceeds that are reasonably intended to compensate the fund for its expenses.Investors Offers high liquidity, trans- Offers investors an option toOffers efficient means ofAccess to private markets. Non-tradedAccess to private markets,Access to private markets, but and Investorparency, and convenience.automate the risk balancediversification. PotentialBDCs may be available to retail investors.but tend to be sold to quali- some only sell to qualified in-Considerations Vulnerable to fluctuations inof their portfolios. ETFs offerfor attractive distributions.Investor qualifications for private BDCs.fied investors. No mandatedvestors. No mandated financial the stock market, potentiallyhigh liquidity. Fees associ- Enhanced returns (via theHigh dividend yields and capital apprecia- financial suitability require- suitability requirements. Low large and quick outflows thatated with these funds haveilliquidity premium andtion potential. Higher risk investment. Tendments. Low minimums.minimums. 1099 tax reporting. lead to losses for investors,gone down over time. leverage). Intra-day liquidity.to attract IRA investors, depending on fund1099 tax reporting. SEC andSEC and 1940 Act investor pro-and potential exit load fees. SEC and 1940 Act investorTend to attract IRA investors,investments. 1940 Act investor protec- tections. Higher fees. Limited protections. depending on fund invest- tions. Higher fees. Limitedliquidity.ments. liquidity. More attractive to IRA inves-tors due to greater liquidity.AssetGenerally may not investFlexibility to allocate assets. iii Broad flexibility to allocatePublic and Private BDCsAt least 70% of as- Interval funds are not sub- Tender offer funds are not Allocation more than 15% of assets inassets. sets must be invested in qualifying assets ject to the same 15% require- subject to the same 15% re-Requirements illiquid securities. (primarily private U.S. companies). ment as mutual funds, butquirement as mutual funds, but they must hold liquid assetsthey must hold liquid assets equal to the repurchaseequal to the repurchase offer offer amount during eachamount during each repur-repurchase period. chase period.Mayer Brown|Investment Vehicle Comparison 29'