Crystallisation is the point at which an accrued performance fee is actually paid to the manager and the high-water mark is reset. Funds typically crystallise annually, sometimes quarterly, and on any redemption for the redeeming shares.
Between crystallisation dates the performance fee accrues in the NAV, rising and falling with performance, but is not paid. At crystallisation the accrued amount becomes a liability, is paid, and the investor's high-water mark moves to the NAV at that date.
More frequent crystallisation favours the manager, because it locks in fees before later losses can reverse them. Allocators generally prefer annual crystallisation.
Crystallisation frequency for POD funds is set in each fund's documents and applied by the administrator. Redemptions crystallise the fee on the redeemed shares.
Get in touch for a demo
