Item 5 – Fees and Compensation
FEAC SLS charges a management fee as a percentage of assets under management based
on an annual rate and paid quarterly. The annual rate is established in the client’s written agreement
and typically applies to the sum of all cash and fair market value (including accrued interest) of
the loans/securities in the account on the last day of the preceding quarter. Management fees
generally range from 0.25% to 0.50% per annum with the lower rates being applicable to non-
discretionary accounts. For larger accounts, FEAC SLS, from time to time, offers break points at
lower rates than these on assets above a certain level. FEAC SLS also charges performance fees
for certain Tradable Credit clients. The client’s written agreement with FEAC SLS describes the
calculation and payment method for the services provided by FEAC SLS.
FEAC SLS has made, and may make in the future, exceptions to its general fee schedule in
its sole discretion based on various circumstances, such as client’s relationship to FEAC SLS,
expectations of significant capital additions in the future, product line, or composition of portfolio,
among other reasons. In such cases, different and reduced fee arrangements have been and may be
negotiated with individual clients or underlying investors in a private fund.
FEAC SLS may also offer a blended fee rate for products that include multiple strategies.
In addition to the firm’s fees, clients, depending upon the product, are subject to various
expenses, including but not limited to custodial, brokerage, audit, legal and third-party
administration. These expenses may vary by product. Please consult the applicable offering
materials for the specific product, if any, for more information on these additional expenses. Please
see Item 12 – “Brokerage Practices” for more information on FEAC SLS’s brokerage practices.
Fees for Private Fund Clients
As investment manager to private, pooled investment vehicles, FEAC SLS receives an
annual advisory fee that is equal to a percentage of the net asset value attributable to the capital
account of each capital member during the relevant calendar year. The advisory fee, which is
described in the funds’ private offering documents, is calculated and paid monthly in arrears.
Fees for Clients invested in CLOs managed by FEAC SLS
For its services as investment manager to various CLOs, FEAC SLS receives a base
management fee and a subordinated management fee based on the aggregate principal balance of
the CLO portfolio. Both these fees are based on a contractual percentage per annum but differ in
terms of their priority of payment relative to payments to the CLO investors. FEAC SLS would
also receive a contingent management fee if a defined internal rate of return (“IRR”) hurdle were
achieved.
Additional Information Concerning Fees and Compensation
From some clients, FEAC SLS may receive a performance-based fee in compliance with
Rule 205-3 under the Investment Advisers Act of 1940, as amended (“Advisers Act”).
Performance-based fees are discussed further in Item 6 – “Performance-Based Fees and Side-By-
Side Management.” For certain private funds, the performance fee may be paid to an affiliate of
FEAC SLS.
FEAC SLS has and may in the future enter into agreements with separate account clients
or underlying investors of its private funds that contain provisions which grant such client or
investor certain preferential terms, including but not limited to: most favored nation, fees, reporting
or liquidity. Such provisions may apply to a single product or across multiple products advised by
FEAC SLS.
In addition, FEAC SLS has invested a portion of a client’s assets in investment vehicles
that are advised or sub-advised by FEAC SLS or its affiliates (controlled affiliated funds), in
situations where, in FEAC SLS’s opinion, the controlled affiliated fund provides a more efficient
and cost-effective way to diversify an account. To the extent that FEAC SLS invests client assets
in a controlled affiliated fund, FEAC SLS will, depending upon the controlled affiliated fund used,
either (1) not charge an advisory fee to the client for investing in such fund, (2) waive investment
advisory fees on the assets invested in such controlled affiliated fund, or (3) credit or avoid through
other means the payment of the separate account advisory fees on the assets invested in a controlled
affiliated fund. However, assets invested in a controlled affiliated fund are subject to the fund fees
and charges applicable to all investors in such controlled affiliated fund. As such, a client can incur
a higher total investment advisory fee if the controlled affiliated fund’s management fee rate
exceeds the rate the client would otherwise pay for the management of its assets.