Aberdeen Asset Management multi-manager Graham Duce has defended performance fees.
The multi-manager says that provided the fees are levied on outperformance of a genuinely challenging benchmark and come with a high watermark, they can be justified.
He says: “It is a contentious issue for us at the moment but we do not have a blanket policy. We will look at the individual fund and work out how the performance fee works.”
Hargreaves Lansdown chief executive Peter Hargreaves sparked an industry debate when he commented in Money Marketing recently that performance fees “only benefit the fund management groups”.
Duce says he favours the Findlay Park American smaller companies fund, which charges a 1 per cent annual management charge and a 15 per cent fee on outperformance of the Russell 2000 index above a high watermark.
He says: “In essence, this has been one of the most consistent alpha generators of the last 10 years. We do not mind paying out where there is consistent alpha.”
But Duce says he will not go so far as to buy so-called “two and 20” funds that have a 2 per cent annual charge and 20 per cent performance fees.
A high watermark ensures that if a fund underperforms, it cannot charge a performance fee on the gains delivered while it makes up that underperformance.