Performance fees

westendguy

Apologies if this is a silly question, but maths is not my strongpoint.

Is it possible to calculate how much a fund would have charged in performance fees over the past 12 months, as I imagine these are not included in the TER?

I understand of course that by their very nature these fees are variable, but I am really trying to just gauge some kind of average by how much they might have impacted on the funds return.

The specific fund I am looking at is the CF Odey absolute return fund.

Many thanks.

Reaper

I don't know where you find historic performance fees paid except perhaps in the fund annual reports. However it would be pretty meaningless anyway as it tells you nothing much about what future fee amounts will be.

Instead of that look at what the fee is. In this case it is 20% with a high water mark.

The 20% means the gains will be throttled back by a fifth. So for example if the fund grew by 10% in a year you would only get 8% growth. Less the annual TER charges too of course.

The "High Water Mark" means if it then fell 5% the fund would have to regain that 5% before they were allowed to start taking performance fees again.

I tend to avoid funds that charge them.

Loughton_Monkey

Reaper wrote: »

.....The "High Water Mark" means if it then fell 5% the fund would have to regain that 5% before they were allowed to start taking performance fees again.....

Are you sure of this?

My own understanding is that most performance fees are nothing to do with whether the fund rises by 10% or falls by 5%. Isn't it usually related to the 'benchmark'?

Hence I think you get the perverse situation of your fund having bombed by 15%, but since the benchmark fell by 20%, the performance fee is paid in full.

Gin & Tonics all round....

westendguy

Many thanks Reaper, very helpful. I too have always been wary of performance fees as I was not sure by exactly how much they would impact on a funds return.

But as you say at the end of the day its the old standard rule regarding past vs future performance, and impossible to call going forward.

Reaper

Loughton_Monkey wrote: »

Are you sure of this?

My own understanding is that most performance fees are nothing to do with whether the fund rises by 10% or falls by 5%. Isn't it usually related to the 'benchmark'?

Often yes, but according to the quick search I did for the fund in question and which I based my post on Best Invest says:

There is a performance fee of 20% of absolute returns with a high water mark.

As it says "absolute" I think it is a simple fee based on the fund movement, rather than one relative to a benchmark.

EDIT: the fund's own web site also says it is not relative to anything:

Performance fee: 20% of net gains on a weighted average basis with an annual high-water mark

talexuser

I would avoid them. I was suckered in to Blackrock Absolute when virtually all the IFAs were recommended it very highly. Stuck with it for a year or so and it did go up but nothing spectacular compared to peers, when Newton and Standard Life equivalents were doing better (both without performance fees I believe?). Jumped ship around a year ago and am still amazed it appears in some recommendation lists today.

Ark_Welder

Loughton_Monkey wrote: »

Are you sure of this?

My own understanding is that most performance fees are nothing to do with whether the fund rises by 10% or falls by 5%. Isn't it usually related to the 'benchmark'?

Hence I think you get the perverse situation of your fund having bombed by 15%, but since the benchmark fell by 20%, the performance fee is paid in full.

Gin & Tonics all round....

This very much depends upon the fund, and they will differ in their approach. Any fund management firm with even a shred of integrity would employ a high water mark so that losses are recouped before additional charges are made. Again, this is why a read of the relevant prospectus should always be done beforehand.

G&T's at 11:30am...? Bit late for me