Why Prospect Capital’s Total Operating Expenses Fell
The components of Prospect Capital’s (PSEC) total operating expenses are base management fees, income incentive fees, directors’ fees, audit, compliance, and tax-related fees, allocation costs, interest and credit facility expenses, and other general and administrative costs.
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Prospect Capital’s total operating expenses fell from $100.9 million in fiscal 1Q17 to $94.8 million in fiscal 1Q18. This year-over-year fall was mainly because of income incentive fees.
Prospect Capital has reported a return on assets of 3% over the last 12 months or on an LTM basis. On the other hand, its peers (XLF) BlackRock Capital Investment (BKCC), Apollo Investment (AINV), and Capitala Finance (CPTA) have reported returns on assets of 2.20%, 3.13%, and 0.31%, respectively, on an LTM basis.
Base management and income incentive fees
Prospect Capital provides investment adviser fees for investment advisory services. The fees that the company provides has two components, base management fees and incentive fees. In fiscal 1Q18, the company saw a marginal fall in base management fees compared to fiscal 1Q17.
Prospect Capital incurred base management fees amounting to $30.2 million in fiscal 1Q18, compared to $30.8 million in fiscal 1Q17.
Incentive fees, on the other hand, is further divided into two parts: income incentive fees and capital gains incentive fees. Prospect Capital has seen a fall in income incentive fees from $19.7 million in fiscal 1Q17 to $15.9 million in fiscal 1Q18.
Prospect Capital has also seen a fall in audit, compliance, and tax-related fees from $1.4 million in fiscal 1Q17 to $1.1 million in fiscal 1Q18. The company saw a decline in other general and administrative expenses from $3.6 million in fiscal 1Q17 to $2.9 million in fiscal 1Q18.