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Fidelity introduces performance-based fees in major shake-up

Portfolio-Bonds-Fixed-Income-Performance-UK-700x450.jpgFidelity 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 benchmark.

There will be a cap and floor for the fees.

Fidelity International president Brian Conroy says the move away from flat fees demonstrates the firm’s commitment to active management.

Conroy says: “These changes will more closely align the performance of our business with the performance of our clients’ portfolios and deliver what we believe clients and regulators are looking for.

“Our fee structure will give back for underperformance of the benchmark, whereas others do not.”

However, the firm also announced today it is preparing to buck the industry trend and charge clients for research costs under Mifid II.

Many of its peers have said they will absorb costs themselves, but Fidelity argues the reduction of its base management fee will offset the client charge.

Conroy says: “Having looked at the implications of upcoming regulation, as well as taking into account feedback from the UK regulator in its recent market study on the lack of pricing innovation in our industry, we believe that a far more fundamental change to how clients are charged needs to be instituted.”



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