Item 5 – Fees and Compensation
ISL and its affiliates provide investment advisory and management services in connection
with private equity and real estate investments and receive fees for such services.
Depending on the particular client, these fees typically include a management fee of up to
2% per year of a client’s committed capital or assets under management, which will be
payable quarterly or semi-annually in advance or arrears. Any fees charged in advance
will be refunded pro-rata in the event of termination of an advisory relationship. The
management fee may be paid from investment proceeds, investors’ capital, or other funds
or assets.
The management fee earned by ISL and its affiliates may be reduced by a percentage of
certain fees received by ISL and certain of its affiliates, including but not limited to:
private equity or real estate activity fees, such as fees paid by Portfolio Companies in
consideration for services rendered in connection with the acquisition of a Portfolio
Company (e.g., advisory services regarding third party financing) as well as consulting or
monitoring services in connection with post-acquisition operations; and fees received
upon exiting an investment. These offsets may reduce management fees for a given
period below zero, and, if so, such offsets may be carried forward, reducing future
management fees.
ISL’s affiliates may also receive a carried interest allocation of up to 20% of profits
realized from the sale of investments in Portfolio Companies.
Specifics on ISL’s and its affiliates’ management fees and compensation in connection
with a Fund are set forth in the offering and/or organizational documents for each Fund.
June 30, 2022
Each Fund generally bears the costs and expenses incurred in connection with the
organization of the Fund and the general partner (or other managing entity, which is
typically an affiliate of ISL) of the Fund as well as all expenses relating to the Fund’s
operations. Subject to a Fund’s organizational documents, the general partner (or other
managing entity) and ISL (and any other adviser or sub-adviser to such Fund) will generally
be responsible for all of their own day-to-day operating expenses, including office overhead
and compensation of employees.
Costs and expenses incurred in connection with the purchase and sale of investments in
Portfolio Companies (e.g., legal, financial, accounting, or consulting costs; the costs of
other advisers or any lenders, investment banks, or other financing sources; and travel
expenses) generally shall be charged to the Funds. Such costs and expenses may be
prorated between the Fund and ISL’s affiliates based on the amount of the Fund’s
investment when a Fund co-invests with ISL’s affiliates. A Fund may also bear a pro rata
portion of all fees and expenses incurred in connection with any co-investment
transactions that are not consummated.
Certain Funds may invest in tandem with other Funds. Although such parallel funds may
have the same economic terms, the structure of such Funds may differ. To the extent
certain organizational and other expenses are incurred by one Fund, they may be borne
by that Fund as well as the parallel Fund.
Certain Funds may offer co-investment opportunities to one or more of their investors.
Co-investing investors pay their own separate expenses with respect to due diligence,
legal, accounting, administration, management and disposition of co-investment
securities, and will reimburse the Fund if that Fund incurs additional expenses as a result
of the investor’s co-investment.
ISL’s affiliates may receive transaction fees from the Funds in connection with the
consummation, holding or disposition of investments in Portfolio Companies or the
termination of proposed but unconsummated Portfolio Company investments. Affiliates
of ISL may also charge the Portfolio Companies other fees, including structuring fees,
underwriting fees, and management fees, a portion of which may also be chargeable to
the Fund.
Specifics on the costs and expenses charged in connection with a Fund are set forth in the
Fund’s offering and/or organizational documents. Please also see Item 12, “Brokerage
Practices” for a discussion of ISL’s brokerage practices in connection with the Funds.
June 30, 2022
Side Letters
ISL or its affiliate may enter into an agreement with an investor in a Fund, in consideration
for investing in a Fund, commonly known as a “side letter.” Pursuant to the side letter the
investor may receive, among other benefits, “most favored nation” terms and/or a
commitment from ISL and its affiliates to structure investments so as to avoid double
carried interest and management fees. These benefits may not be available to all investors.
Negotiation of Fees; Waivers
The fees payable by a Fund may be negotiated on a case-by-case basis. ISL or its affiliates
may waive all or a portion of the management fee or carried interest up to a specified
amount that would otherwise be charged advisory clients who are current or former
senior managers of Portfolio Companies in which ISL’s affiliates have invested. Similarly,
ISL may waive all or a portion of the management fee or carried interest up to a specified
amount that would otherwise be charged advisory clients who have strategic or other
important relationships with a Fund or ISL and its affiliates. Employees or affiliates of ISL,
including the Funds’ general partners, and consultants to or family members of such
persons, may also receive a reduction in the management fee.