FS Energy & Power Fund


April 22, 2024

Type of alert:

FS Investment Solutions, FS Energy & Power Fund, also recognized as the Franklin Square Energy & Power Fund, represents a non-traded business development company (non-traded BDC) specializing in investments in the debt and equity securities of private energy and power companies, often dealing with various energy sources like crude oil or natural gas. However, it’s important to note that FS Energy & Power Fund constitutes an illiquid, high-risk investment.

Non-traded BDCs such as FS Energy & Power Fund typically impose substantial commissions, creating incentives for broker-dealers and their financial advisors to recommend these funds to clients, even if they may not align with their investment objectives. FS Energy & Power Fund, for instance, levies commissions and fees exceeding 11% upfront, implying that only 88.5% of investors’ funds are actually deployed into the investment. Consequently, investors would need to achieve a 13% return simply to break even. Moreover, additional annual expenses may further diminish potential returns, complicating the profitability prospects for FS Energy & Power Fund investors even in the presence of positive returns.

Additionally, FS Energy & Power Fund commenced as a “blind pool,” indicating that the Fund had yet to identify or research any specific investments upon investors purchasing shares. This lack of crucial information makes it challenging to provide investors with an accurate evaluation of both the actual risks involved and their potential for profitability.

Many investors in FS Energy & Power Fund have experienced substantial investment losses due to misrepresentations, omissions, or inadequate disclosure by their financial advisors or stockbrokers when promoting the Fund. Brokerage firms should have refrained from recommending FS Energy & Power Fund to conservative or moderate retail investors, retirees, or inexperienced investors.

Investors who acquired FS Energy and Power Fund shares at the initial price of $10 per share might face losses of 80% or more on their principal investment.

For a complimentary consultation, individuals can contact Chapman Albin at 214-241-8172 or visit www.chapmanalbin.com.

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