Average performance fee falls 4% from historic norm

The average performance fee charged by European cross-border funds has dropped from 20% to 16%, according to a report from independent research firm Fitz Partners.

An analysis of 1,020 funds investing in the main asset classes contained in the latest edition of the firm’s annual “Performance Fee Benchmarking Report and Database” found that 14% of European cross-border funds charge a performance-related fee.

Fitz Partners’ chief executive Hugues Gillibert said: “The average performance fee now charged through the main asset classes is around 16%, a drop from the 20% fee that was considered as the norm in the past.”

Gillibert added that the structure of performance fees across the industry varies significantly and results in very different costs to investors.

“The choice of benchmark, definition of high water marks or level of hurdles have a significant impact on the actual performance fee charged to investors,” he said.

Fitz_Partners_fees_graphThe research found that 80% of funds with performance fees use a benchmark in their fee calculations.

The study also found that 90% of equity funds measure their performance fee against a chosen benchmark, of which 6% would use a straight “cash” related benchmark such as Libor or Euribor as a basis of their calculations without any extra hurdle.

The average performance fee charged on equity funds with a “cash” index in their fee structure is 9% while equity funds calculating their performance fees using an equity index charge on average 17% of their out performance.

“Performance fee rates are not the only factor that define the level of performance fees that would be charged to investors and looking at performance fee rates in isolation would be misleading,” said Gillibert.

“The rates of performance fees should always be compared alongside extra characteristics such as high water marks or hurdles for example.”

©2017 funds europe

HAVE YOU READ?

THOUGHT LEADERSHIP

Innovative US companies are providing some of the solutions to the climate crisis and transition to a more sustainable economy. We see potential opportunities in areas including renewable energy and…
FIND OUT MORE
This white paper outlines key challenges impeding the growth of private markets and explores how technological innovation can provide solutions to unlock access to private market funds for a growing…
DOWNLOAD NOW

IRELAND SPOTLIGHT

Visit our dedicated Ireland channel for all the latest news and analysis on the country's investment industry.
READ MORE

PRIVATE MARKETS FUND ADMIN REPORT

Private_Markets_Fund_Admin_Report

LATEST PODCAST