GLOBAL - Some 40% of funds worldwide secured incentive-based fees in 2002 despite the downturn in global markets.
A new report published by London-based Fitzrovia International, the fund research company, analysed the performance fee structures for 2,110 funds internationally, including 280 hedge funds.
Those funds that secured perfomance-related returns saw revenue increase by 57% over and above that arising from annual management fees.
Paul Moulton, chief executive of Fitzrovia, said: “While the primary aim of a performance fee is to incentivise the portfolio manager to deliver superior returns, best corporate governance practices suggest there should be a balance between maximising fund company revenues and treating investors fairly.”
Fitzrovia has put together a performance fee checklist as a way of encouraging managers to benchmark their performance fee structure and, at the same time, allow investors to understand the structure more easily.
The research also showed that while far more alternative investment funds have a high water mark in place than traditional funds, no alternative investment funds in the study have a fee cap.
Moulton added: “While it may be difficult in current market conditions for fund managers to consider, or review, performance fees, now really is the time when these fees are most justifiable and relevant before markets bounce back.”
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