Lobo's Investment

Some fund houses charge performance charge on top of management fee. As an investor, the total expense of a fund have to be clearly awared, as that's a matter about the net return. Yet, some fund house are charging investors in a fairer way than others.

For example, are these two fund hourse charging similar performance fee?

Value Partners
Management fee 1.25% p.a.
Performance fee 15% of profit (High on high principle)

Henderson
Magement fee 1.2% p.a.
Performance fee 10% of the Relevant amount
(where relevant amount is relative to corresponding sector index)

The VP Classic Fund have 41.24% return last year. As seen from Morningstar, the benchmark index raised over 70%! Before deducting management expenses, it performed at least 10% lower than the benchmark index, yet according to the rules, VP's management still got a performance fee (15% of profit)! As a result, investor got 30% less than benchmark return. Is it fair?



The Handerson Pan European Equity have 68.78% return last year, according to Morningstar. That's slightly above the benchmark index. The management was awarded a performance fee of just 0.4% (half year number, as shown in annual report).

The performance charges had a difference. One is 30 times of the other!

For the case of VP, as performance is measured not against benchmark, management got huge return because they are in a big bull market disregrad of under perform in the sector. Obviously, the structure for VP is too good for the fund house and unfair to investors.

Quite a lot of people like VP, but I believe they are charging too much, I would rather invest in funds with fair incentive structure.