--- title: "BDC incentive fees in Q2 2026: reversal, deferral and waiver | Altss Blog" description: "Ares Capital deferred earned fees and reversed a GAAP accrual. FS KKR’s adviser waived fee entitlement. June 30 reports separate expense from adviser cash…" canonical: "https://altss.com/blog/bdc-incentive-fees-ares-fsk-deferral-waiver-cash-payments" --- [Altss Research](https://www.linkedin.com/company/altss) 4 min read Updated Oct 22, 2026 Share # BDC incentive fees in Q2 2026: reversal, deferral and waiver Ares Capital deferred earned fees and reversed a GAAP accrual. FS KKR’s adviser waived fee entitlement. June 30 reports separate expense from adviser cash compensation. [Back to blog](https://altss.com/blog) Share [LinkedIn](https://www.linkedin.com/sharing/share-offsite/?url=) [X](https://x.com/intent/tweet?url=&text=BDC%20incentive%20fees%20in%20Q2%202026%3A%20reversal%2C%20deferral%20and%20waiver) Copy link Image: Two conceptual mechanisms contrast FS KKR’s open gate for a partial, finite income-fee waiver without recoupment with Ares Capital’s captive crosshead for earned payment deferred subject to its agreement. Their geometry encodes no fee amounts. Ares Capital’s adviser earned an $84 million income-based fee in the second quarter of 2026, but payment was deferred. The BDC’s capital-gains fee line separately recorded a $21 million reduction of a prior accounting accrual. FS KKR Capital's same-quarter report instead showed an $11 million income-fee waiver. For an allocator comparing vehicle costs, those changes have different consequences: an earned fee can survive a payment delay, while a non-recoupable waiver removes the specified entitlement. The June 30 reports also distinguish fee expense from adviser cash compensation. FS KKR paid more in income incentive fees during the first half than it accrued for that period, settling part of an opening liability. A fee comparison built around the income statement alone would miss that timing. ## Ares Capital: an earned fee with deferred settlement [Ares Capital's June 30 Form 10-Q](https://arcc.ares.com/media/document/1cbc95d3-9338-4c60-ae48-079474d44300/assets/arcc2026q2.pdf?disposition=inline) records $84 million of income-based fees for the quarter. Note 3 expressly says payment of that earned fee was deferred under the advisory agreement. The balance sheet still reports an $84 million income-based fee payable at June 30. The agreement's deferral provision compares distributions and the change in net assets over the most recent four full calendar quarters with a contractual threshold. Deferred fees carry forward to later calculation periods to the extent payable under the agreement. The deferral changes settlement timing; it does not supply a permanent reduction in the fee earned or a guaranteed future payment date. A separate capital-gains calculation explains the negative expense line. Ares Capital reported a $21 million quarterly reduction, and an $82 million reduction for the first half, in the fee accrued under GAAP. The balance-sheet liability labelled capital gains incentive fee payable fell from $82 million at December 31 to zero at June 30. Yet Note 3 says no capital-gains fee was actually payable under the agreement at either date. The accounting accrual includes unrealized capital appreciation. The contractual fee instead uses cumulative realized gains, net of realized losses and unrealized depreciation. A reduction in the contingent accrual therefore reduces reported expense without establishing a refund from the adviser. It is a different event from deferring the cash settlement of the earned income fee. ## FS KKR: a finite waiver without recoupment [FS KKR's June 30 report](https://www.fskkrcapitalcorp.com/wp-content/uploads/2026/08/fsk-10-q-q2-2026.pdf) describes its adviser's June 29 waiver letter. It covers 50% of the subordinated income incentive fee otherwise receivable, beginning with the quarter ended June 30, 2026 through the quarter ending March 31, 2027. The report expressly says no portion of the waived fee is subject to recoupment. That provision removes the specified fee entitlement during a defined period. It covers the subordinated income incentive fee, rather than all management and advisory expenses. The quarterly operations table separately shows $23 million of that fee and an $11 million waiver; the related-party table reports $12 million net. Those are reported whole-million amounts, not an unrounded reconstruction of the contractual percentage. The distinction from Ares Capital's deferral is the future claim. FS KKR's waived amount cannot be recovered under the disclosed waiver; Ares Capital's deferred earned fee can carry forward subject to its agreement. Neither description supports assuming a permanent change to all future fee rates. ## Reconciling expense, cash and the closing liability For the six months ended June 30, FS KKR's related-party note reports $37 million of subordinated income incentive fees accrued, net of an $11 million waiver. It separately discloses $53 million paid to the adviser during those six months. The payable was $28 million at December 31, 2025 and $12 million at June 30, 2026. At the reported whole-million precision, the bridge is $28 million opening payable plus $37 million net accrual less $53 million paid, leaving $12 million payable. The cash payment exceeds the period's net expense because the reconciliation includes the opening liability. The $53 million is a first-half cash figure, not a second-quarter payment amount or the waiver's value. Altss's [Form D distribution-cost cases](https://altss.com/blog/zero-sales-commissions-fund-filings-q3-2026) show why the payer and compensation basis matter beside a reported fee field. These BDC reports support a further distinction between an expense, a contractual claim and settlement of that claim. An allocator assessing the durability of lower reported costs needs the waiver's expiry and recoupment terms, the status of deferred fees, and the opening-to-closing payable bridge. The headline fee line answers only part of that economic question. 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