AFA Interval Fund Seeks Mount Logan as Adviser and Proposes Its First Incentive Fee

AFA Asset Based Lending Fund, an interval fund with $232,823,810 of net assets at July 31, 2026, has filed a preliminary proxy statement asking shareholders to approve Mount Logan Management, LLC as investment adviser in place of Alternative Fund Advisors, LLC and to elect four new trustees (PRE 14A, accession 0001999371-26-023315, filed October 22, 2026). Two things change with the adviser. The first is how the fund intends to invest: the proxy says its assets are now 'primarily allocated to underlying funds managed by third-party managers' and that, upon closing, 'the New Adviser will allocate future investments primarily to loans and credit instruments originated directly by Mount Logan'. The second is how the adviser is paid: the management fee would move from 1.10% of net assets to 1.00%, and the fund would add an incentive fee on its net investment income, which the existing agreement does not have.

This is a preliminary filing, not a completed transaction. The proxy leaves blank the record date, the meeting date and the closing date; its cover letter reads 'The Transaction is expected to close on [ ], 2026'. Mount Logan Capital Inc., the parent of the proposed adviser, gives a month in its Form 10-Q filed November 10, 2026 (accession 0001628280-26-072805): 'The Transaction is expected to close in January 2027.' The two proposals depend on each other: 'If either proposal is not approved, neither proposal will take effect.' The fund had filed no definitive proxy as of November 12, 2026. Mount Logan Management is the adviser whose Opportunistic Credit Interval Fund took in the Yieldstreet Alternative Income Fund's assets in August 2026, which AltStreet covered in Yieldstreet Alternative Income Fund Files to Deregister.

From third-party funds to loans Mount Logan originates

The proxy says the fund's 'investment objectives, principal investment strategies and principal risks will not change' and that it 'will continue to operate as a closed-end interval fund following Closing'. What it describes as changing is who originates the assets. The fund 'currently operates as a multi-manager fund strategy'. Under Mount Logan, the Q&A says, 'Bringing origination of investments in-house from third-party origination may provide greater control over the terms and conditions of the Fund's investments and reduce fees embedded in underlying third-party funds'. The board's discussion says 'Mount Logan intends to assume responsibility for direct origination, which includes working directly with borrowers to originate, underwrite, and monitor investments', and that the 'associated costs and resource commitments are substantially greater than those involved in managing a portfolio composed solely of underlying funds'.

That shift is the basis for the proxy's expense projection: 'Acquired Fund Fees and Expenses are estimated to decline from 1.50% to 0.00% over three years.' The estimate is stated in the proxy's Q&A without naming who made it, and the proxy does not say which holdings in third-party funds would be redeemed or on what schedule. The existing sub-advisory agreement 'will terminate and not be replaced', and the fund's name 'is expected to change to' Mount Logan Asset Based Lending Fund.

How the incentive fee works

The Q&A describes the new fee as 'a 10% incentive fee based on the Fund's pre-incentive Fee net investment income, subject to a 1.50% quarterly hurdle rate (6.0% annualized) and a catch-up provision'. The form of agreement attached as Exhibit A sets out three steps, tested each calendar quarter against average daily net assets. First, there is 'No Incentive Fee in any calendar quarter in which the Fund's pre-Incentive Fee net investment income does not exceed the hurdle rate of 1.50%'. Second, Mount Logan receives '100% of the Fund's pre-Incentive Fee net investment income with respect to that portion of such pre-Incentive Fee net investment income, if any, that exceeds the hurdle rate but is less than 1.6667% in any calendar quarter', the band the exhibit calls the catch-up. Third, it receives '10% of the amount of the Fund's pre-Incentive Fee net investment income, if any, that exceeds 1.6667% in any calendar quarter', and the exhibit states the result: 'once the hurdle is reached and the catch-up is achieved, 10% of all pre-Incentive Fee net investment income thereafter is allocated to the Adviser'. The hurdle therefore decides whether a fee is paid, not how much income it is charged on. Once income for the quarter passes 1.6667% of net assets, the fee equals 10% of all of it, including the first 1.50%. In the exhibit's third example, income of 3.3595% for the quarter produces a fee of 0.3360%, 'which is equal to 10% of pre-Incentive Fee net investment income for the quarter'.

The exhibit's definition of that income counts amounts not yet collected and leaves out capital results: it 'includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay-in-kind interest and zero coupon securities), accrued income that the Fund has not yet received in cash', and it 'does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation', so a loss on a loan does not reduce the income on which the fee is calculated.

For three years the fee is capped. Under an Incentive Fee Waiver, the aggregate incentive fee for each year after the effective date 'shall not exceed' 0.10% of average daily net assets in the first year, 0.50% in the second and 1.00% in the third. Waived amounts are 'waived permanently', and the waiver runs to the third anniversary, 'at which time it shall terminate automatically without further action by either party'. The board's discussion describes the same arrangement as Mount Logan having 'agreed to waive the proposed incentive fee for three years', and acknowledges that the new terms 'may result in a fee structure that is higher than that of the current fee structure'.

Fees now and proposed

Current terms are from the proxy and the fund's prospectus effective August 31, 2026 (accession 0001999371-26-018980); proposed terms are from the proxy and its Exhibit A.

The proxy's table of 'Estimated Annual Cost Based on a $10,000 Investment' covers three lines only: 'Management Fee (paid to Mount Logan)', 'Incentive Fee (paid to Mount Logan)' and 'Estimated Acquired Fund Fees and Expenses (paid to third parties)'. Their 'Estimated Combined Amount' is 'Up to $260' today, then 'Up to $260' in year one, 'Up to $225' in year two and 'Up to $200' in year three. The management fee line goes from 'Up to $110' to $100. The incentive fee line goes from 'None' to 'Up to $10', 'Up to $50' and 'Up to $100', the dollar equivalents of the three caps. The acquired fund fees line goes from $150 today to $150, $75 and $0.

The lower totals in years two and three therefore depend on the third line, the proxy's estimate that fees inside third-party funds fall to zero as new investments go to loans Mount Logan originates. AltStreet arithmetic: the two lines paid to the adviser total up to $110 today and up to $110, $150 and $200 in years one to three. The illustration does not cover the fund's other costs. The prospectus fee table shows total annual expenses of 4.03% for Institutional Class and 3.83% for Founder Class before waivers, including 0.84% of borrowing costs, and the proxy gives no pro forma version of that table.

Repurchases

The proxy does not propose a change to the repurchase policy. Under the prospectus each quarterly offer 'will be for no less than 5% of the Fund's Shares outstanding'. In the offer completed May 8, 2026 the fund repurchased 7.00% of its shares and 'approximately 84.80% of tendered shares were accepted' (N-CSR, accession 0001999371-26-014454). The Form N-PORT for July 31, 2026 (accession 0001193125-26-396284) reports redemptions of $17,213,618 in May 2026 and none in June or July, against sales of $3,835,449 and reinvested distributions of $1,535,963 over the three months. The offer with a November 6, 2026 request deadline is for up to 5% of shares; net asset values on September 30, 2026 were $8.93 for Institutional Class and $8.95 for Founder Class (Form N-23c-3, accession 0001999371-26-022293). The results of that offer and of the offer that closed in August 2026 are not in the filings reviewed.

What the seller receives

The proxy does not state what Mount Logan pays Alternative Fund Advisors ('AFA'). Mount Logan Capital Inc.'s Form 8-K of October 20, 2026 (accession 0001628280-26-066397) does. Mount Logan Management 'has agreed to pay AFA up to $4,600,000, consisting of $300,000 in cash at closing and deferred installments thereafter, payable after the first, second and third anniversaries of the closing, which are subject to reduction if AMCLX's net assets decline during the first year following the closing'. It 'has also agreed to pay AFA, for five years following the closing, 40% of the management and incentive fees received by MLM from AMCLX, net of specified expenses, subject to suspension if AMCLX experiences specified net outflows for eight consecutive quarters and its net assets at the end of that period are below its net assets at closing'. AMCLX is the 8-K's short name for the fund.

The Asset Purchase Agreement filed as Exhibit 10.1 to the 8-K sets the installments at $1,150,000 after the first anniversary less the $300,000 closing payment, $1,610,000 after the second and $1,840,000 after the third, each multiplied by a ratio tied to the fund's net assets. Mount Logan's press release of October 20, 2026, furnished as Exhibit 99.1, says the deal 'will bring MLM's combined interval fund assets to approximately $460 million' and that 'Mount Logan currently expects the Transaction will be immediately accretive to FRE upon closing'; it calls FRE 'a non-GAAP financial measure' and gives no dollar estimate. The release expected closing 'in Q1 2027'; the 10-Q filed three weeks later says January 2027.

The vote, the costs and what happens if it fails

The four nominees are Alexander Duka, Robert Warshauer, George Grunebaum and Edward Goldthorpe. The proxy says each 'currently serves as a trustee and/or officer of Opportunistic Credit Interval Fund'. The current board determined that Mr. Goldthorpe would be an 'interested person' because of 'his positions with Mount Logan Capital, Mount Logan, and BC Partners' and that the other three would be independent. The advisory agreement needs a 'majority of the outstanding voting securities' as the Investment Company Act defines it: the lesser of 67% or more of the shares present at a meeting where holders of more than 50% of outstanding shares are present, or more than 50% of outstanding shares. The proxy says abstentions and broker non-votes count as votes against that proposal. Trustees are elected by a plurality of the shares voted, with a quorum of one-third of shares.

On costs: 'The Fund will not bear any portion of the costs associated with the Transaction or any costs and expenses associated with this proxy including legal expenses and the solicitation of shareholder votes', and 'The cost of solicitation will be borne entirely by AFA'. The estimated solicitation cost is left blank. If either proposal fails, 'the Current Board would continue to serve the Fund, AFA would continue to serve as investment adviser to the Fund and the current sub-adviser would continue to serve as such'. The 8-K adds that either party may terminate the purchase agreement in certain circumstances, including 'if the closing has not occurred by June 30, 2027'.

What the filings do not show

The preliminary proxy leaves blank the record date, the meeting date, time and place, the mailing date, the closing date, the shares outstanding, the holders of 5% or more of a class, the estimated solicitation cost and the amount waived in fiscal 2026 ('AFA waived and/or reimbursed $[ ]'). It does not state the consideration Mount Logan pays AFA, gives no pro forma total expense ratio, and does not say which holdings in third-party funds will be redeemed or when. The fund's net assets after July 31, 2026 are not in the filings reviewed. A definitive proxy would fill in the dates.