A performance fee, or incentive fee, is the share of a fund's profits paid to the manager, typically 20%. It is calculated per investor above a high-water mark and sometimes above a hurdle rate, and crystallises at set intervals, usually annually or quarterly.
Performance fees align the manager with investors but create accounting complexity, because investors who enter at different NAVs have different profit positions. Funds solve this with series accounting or equalisation so that each investor pays only on their own gains.
The fee accrues at each valuation point so that NAV reflects the liability, and crystallises, meaning it is actually paid and the high-water mark reset, at the crystallisation date.
Performance fees on POD funds are set by the manager, calculated by the administrator per series against each investor's high-water mark, and crystallise at the interval stated in the fund documents.
Get in touch for a demo
