Key Takeaways
- • Morningstar argues that acquired fund fee expenses (AFFE) understate the true costs of semiliquid private market funds from Wellington and Capital Group, because legal and accounting technicalities exclude some underlying fees.
- • WVB Blackstone All Privates, a Wellington fund launched in July 2026 with roughly 91% of assets in four Blackstone semiliquid strategies, reports AFFE of only 0.76%, while Morningstar estimates its economic cost from underlying funds is closer to 3%.
- • Blackstone Private Multi-Asset Credit and Income reports a 3.12% AFFE, which Morningstar says is reasonably close to its expected figure of around 3.40%, because its underlying funds are 1940 Act-registered and fully included.
- • Capital Group KKR U.S. Equity+ (USEPX), launched March 2026, reports 0.14% AFFE, but Morningstar estimates about 1.03% of additional AFFE from its roughly 32% stake in KKR Private Equity Conglomerate (K-PEC), which had a 3.19% operating expense ratio in its 2025 annual report.
- • Morningstar says roughly 80% of semiliquid funds in the Morningstar private equity category include AFFE in prospectus fee tables, but those figures typically exclude incentive fees from underlying private funds.
Summary
A Morningstar analysis argues that the acquired fund fee expense (AFFE) metric, which is meant to capture the fees of a parent fund's underlying holdings, fails to reflect the economic reality of semiliquid private market funds. Morningstar has introduced new Semiliquid Cost Estimates to aid fee comparisons, but says acquired fund fees remain difficult, if not impossible, to normalize across funds because disclosure practices are inconsistent.
The central example is WVB Blackstone All Privates (WVPAX), a fund of Blackstone funds launched in July 2026 and run by Wellington in conjunction with Vanguard and Blackstone. It holds roughly 91% of its assets in four semiliquid Blackstone strategies yet reports AFFE of only 0.76%, roughly one-quarter of the figure for Blackstone Private Multi-Asset Credit and Income (BMACX). Morningstar attributes the gap to legal technicalities. The two funds BMACX holds are 1940 Act-registered, so their full operating cost ratios, including debt and interest costs, flow into the parent's AFFE. By contrast, WVB's exposure to Blackstone Real Estate Income Trust (BREIT) is excluded because REITs are treated as operating companies, and its private equity and infrastructure exposures run through feeder vehicles into aggregator funds where fees are actually collected but are not counted under AFFE rules. Even excluding BREIT, Morningstar estimates the fund's true economic cost from underlying funds is closer to 3%, and roughly twice the sticker price when incentive fees are included. Morningstar notes that the fund does include a feature under which Wellington reimburses its share of underlying incentive fees in periods when the overall fund loses money.
Morningstar also highlights Capital Group KKR U.S. Equity+ (USEPX), launched in March 2026, which has roughly a third of its assets in Class I shares of KKR Private Equity Conglomerate (K-PEC). K-PEC is registered as an operating company, which exempts it from AFFE reporting, even though it functions similarly to pooled private equity funds. According to K-PEC's 2025 annual report, its operating expense ratio was 3.19%, including incentive fees. Morningstar estimates this would add roughly 1.03% of AFFE to the fund's reported 0.14%, which would effectively double its prospectus expense ratio.
Morningstar says these examples are not outliers and that roughly 80% of semiliquid funds in its private equity category include AFFE in prospectus fee tables, typically excluding incentive fees from underlying private funds. The firm argues that high fees, regardless of where they are collected, combined with high cash balances held for liquidity, create a significant hurdle for semiliquid offerings competing with low-cost public market options, and calls for more consistent AFFE treatment across vehicles.
The central example is WVB Blackstone All Privates (WVPAX), a fund of Blackstone funds launched in July 2026 and run by Wellington in conjunction with Vanguard and Blackstone. It holds roughly 91% of its assets in four semiliquid Blackstone strategies yet reports AFFE of only 0.76%, roughly one-quarter of the figure for Blackstone Private Multi-Asset Credit and Income (BMACX). Morningstar attributes the gap to legal technicalities. The two funds BMACX holds are 1940 Act-registered, so their full operating cost ratios, including debt and interest costs, flow into the parent's AFFE. By contrast, WVB's exposure to Blackstone Real Estate Income Trust (BREIT) is excluded because REITs are treated as operating companies, and its private equity and infrastructure exposures run through feeder vehicles into aggregator funds where fees are actually collected but are not counted under AFFE rules. Even excluding BREIT, Morningstar estimates the fund's true economic cost from underlying funds is closer to 3%, and roughly twice the sticker price when incentive fees are included. Morningstar notes that the fund does include a feature under which Wellington reimburses its share of underlying incentive fees in periods when the overall fund loses money.
Morningstar also highlights Capital Group KKR U.S. Equity+ (USEPX), launched in March 2026, which has roughly a third of its assets in Class I shares of KKR Private Equity Conglomerate (K-PEC). K-PEC is registered as an operating company, which exempts it from AFFE reporting, even though it functions similarly to pooled private equity funds. According to K-PEC's 2025 annual report, its operating expense ratio was 3.19%, including incentive fees. Morningstar estimates this would add roughly 1.03% of AFFE to the fund's reported 0.14%, which would effectively double its prospectus expense ratio.
Morningstar says these examples are not outliers and that roughly 80% of semiliquid funds in its private equity category include AFFE in prospectus fee tables, typically excluding incentive fees from underlying private funds. The firm argues that high fees, regardless of where they are collected, combined with high cash balances held for liquidity, create a significant hurdle for semiliquid offerings competing with low-cost public market options, and calls for more consistent AFFE treatment across vehicles.
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