Performance fees still need work: Morningstar
He said there were a number of absolute returns-style managers who structured their performance fees so they were rewarded on a cash-rate-plus basis.
That meant finds could ride equity markets up, and perform barely above the index, and still charge performance fees of up to 5%, he said.
Some managers would have a higher rating on Morningstar’s database if they had fairer fee structures, he said.
The FMA issued a guidance note last year, which described how performance fees should be disclosed, and said when a fund’s hurdle rate of return is linked to the performance of a market index different to the comparative index, this should be clearly disclosed in the PDS so that prospective investors understand the implication.
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