View more on these topics

Fidelity: Why we introduced performance fees

Paras Anand

We believe that reducing our headline charge for asset management coupled with incorporating a new variable element into our management fee best supports our ability to deliver strong, fundamental research-based active management, while firmly aligning our clients’ interests.

Our new charging model is a solid response to the criticisms that have been levelled at the active fund management industry, in particular the lack of transparency in charges, lack of innovation in pricing and that firms are not always believed to work in the best interests of their clients.

We believe our solution will offer demonstrable value to clients, strengthen alignment to our clients’ interests and provide an additional buffer in cases where we do not deliver outperformance.

Many “performance fees” are asymmetric in their application, with the manager participating only in the upside. Our variable management fee is a consciously symmetric two-way sharing of risk and return. Where we deliver outperformance we will share in the upside. Where we deliver only benchmark performance or less, our clients will pay less.  We will only charge a full fee for active management when our clients receive the full financial benefits of active management over the long term.

Clients will have a choice whether to take advantage of the new variable management fee arrangements, but we fundamentally believe this structure will be attractive to clients across our active equity capabilities, for both wholesale and institutional clients, aligning our interests with theirs.

Paras Anand is the chief investment officer for equities, Europe at Fidelity International

Recommended

Fund investors seek more details on Fidelity’s fees changes

Fidelity Investments’ new fee structure appears to better align with investor interests, but more details are needed before it can properly be compared with the status quo offered by competitors, fund investors say. Fidelity International says as part of a global shake-up of fees it will introduce the ‘fulcrum fee’, which means fees will be […]

Fidelity introduces performance-based fees in major shake-up

Fidelity is introducing a new fee structure that will link charges to portfolio performance. Fidelity International says as part of a global shake-up of fees it will introduce a ‘fulcrum fee’, which means fees will be higher when it delivers outperformance net of fees, but will be lower if performance meets or is below the […]

Platforms pledge to help advisers with Mifid II rules

Platforms are setting out their stall on whether they will help advisers with the Mifid II requirement to tell customers when their portfolios drop by more than 10 per cent. Under Mifid II, which will come into force on 3 January 2018, clients invested in a discretionary portfolio must be informed when the overall value […]

5

Nutmeg sustainability called into question by fee campaigners

SCM Direct, the wealth manager run by Brexit and fee transparency campaigners Gina and Alan Miller, has called Nutmeg’s business model into question after results yesterday showed the robo-adviser’s mounting losses. Nutmeg reported losses of £9.4m for 2016, up from £8.9m in 2015. In a blog on the SCM website, the Millers say the Treasury […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment