Mutual funds can now hide BDC fees from investors—legally.
H.R. 2225 — Access to Small Business Investor Capital Act · Filed by Brad Sherman (D-CA) · 25 cosponsors · Introduced Mar 18, 2025 · Passed chamber
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What it does
This bill allows registered investment companies (mutual funds, ETFs, closed-end funds) to exclude fees they pay to business development companies (BDCs) from their disclosed 'Acquired Fund Fees and Expenses' when reporting to the SEC. In practice, this lets fund managers show lower total fees to investors by hiding the cost of investing in BDCs, even though those costs are real and ultimately borne by fund shareholders.
Why we flagged it
The bill's operative mechanism is to permit the omission of real fees from investor-facing disclosures. It does not eliminate the fees themselves—only the requirement to report them transparently. This is a disclosure carve-out that benefits fund managers and BDCs at the expense of investor clarity.
What the text implies
- Investors will see lower headline fee figures in fund prospectuses, but the actual cost of their investment remains unchanged—the BDC fees are still paid, just hidden from the fee table. This creates a 'fee illusion' that may mislead retail investors comparing fund costs.
- The bill applies to all registered investment companies (mutual funds, ETFs, closed-end funds) investing in BDCs, potentially affecting millions of retail investors whose fund holdings include BDC exposure without their knowledge of the true fee burden.
The full analysis lists 4 implications of this text.
Who stands to gain
registered investment companies (mutual funds, ETFs, closed-end funds); business development companies (BDCs); fund managers and advisers