While the concept of a pass-through expense model is most often associated with multi-strategy alternative investment funds, this expense structure is beginning to gain wider traction among other managers as well, depending on various considerations.
What is a pass-through expense structure?
In the most common iteration of a pass-through expense structure, the fund will bear not only the fund’s expenses (e.g., legal, audit and trading), but also most if not all of the overhead costs that would generally be paid by the manager (e.g., salaries and bonuses of firm personnel, and other overhead costs). This is usually in addition to, but sometimes in lieu of, the management fee charged by the manager.
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