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HY IT - AIC Sector Performance fee concern

General discussions about equity high-yield income strategies
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HY IT - AIC Sector Performance fee concern


Postby 1nvest » May 1st, 2021, 6:28 pm

Moderator Message:
The list mentioned below is this one. - Chris

Looking down the list and first impression is that the ongoing charge and performance fee is a concern in a number of cases IMO. The feeling I get, not being familiar with most of those funds, is that in some cases they can levy a heavy performance fee - such as BAF showing over a 9% OCF+performance fee.

I'm guessing that, for instance, as the S&P500/US had a great year that they get a nice performance fee as a result. Which could just be a reflection of high volatility. Stocks down -40% one year, no performance fees for the manager, next year stocks up +67% and perhaps +6.7% performance fee paid to the fund manager. A round trip in gross stock compound gain terms, 0% overall investor benefit across those two years, less -6.7% performance fee to the fund manager for 'having done so well' in the second year, leaving the actual investors down at 93.3% overall.

On that basis a fund manager interested in maximising the lining of their own pockets might look to maximise volatility, and believe that BAF does so to net gearing of 60% levels.

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