Quantcast
The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:Beyond Two-and-Twenty: Seeking Symmetrical Comp For Fund Firms Not Rated 0.0 Email Routing List Email & Route  Print Print
Tuesday, February 16, 2016

Beyond Two-and-Twenty: Seeking Symmetrical Comp For Fund Firms

News summary by MFWire's editors

Fundsters may want to brace themselves for advisor and investor questions about new research on a different kind of performance-based fees.

Andrew Clare
Cass Business School
Professor of Asset Management
In this week's issue of Barron's, Sarah Max highlights research on "a symmetric fee structure" proposed by a professor in London, Andrew Clare. Clare is an associate dean at Cass Business School, and he is a professor in, wait for it, asset management!

Clare proposes that fund firms that run active funds keep 50 percent of their funds' positive alpha (i.e. above-benchmark performance) and repay 50 percent of the difference when their funds underperform the benchmark. The professor and his folks ran Monte Carlo simulations to show that such a fee structure would, unsurprisingly, cut into fund investors' realized alpha in exchange for muting the pain of underperformance: it would smooth the ride a bit.

Barron's contrasts Clare's idea with both the old school two-and-twenty hedge fund fees and the performance-based fees used on many Fidelity, Putnam, and Vanguard funds, where expense ratios can rise and fall depending on how well the funds perform. Active managers also have another kind of performance-based incentive: when a fund out-performs, net inflows usually rise, driving up the fund firm's asset-based compensation.

Paul Hession, chief operating officer of Fidelity's equity group, weighs in on the Boston Behemoth's fees that fluctuate based on performance. And Barron's also offers comments from Terry Dennison (U.S. director of investment consulting at Mercer), C.T. Fiztpatrick (founder and PM at Vulcan Value Partners), Russ Kinnel (director of manager research at Morningstar), Joseph Mezrich (head of quantitative research at Nomura Securities, the soon-to-be new backers of American Century), and David Waddell (chief investment strategist at Waddell & Associates), all of whom offer critiques of Clare's proposal. 

Edited by: Neil Anderson, Managing Editor


Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE

0.0
 Do You Recommend This Story?



GO TO: MFWire
Return to Top
 News Archives
2024: Q4Q3Q2Q1
2023: Q4Q3Q2Q1
2022: Q4Q3Q2Q1
2021: Q4Q3Q2Q1
2020: Q4Q3Q2Q1
2019: Q4Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Raw XML
Add to My Yahoo!
follow us in feedly




©All rights reserved to InvestmentWires, Inc. 1997-2024
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use