Performance Fee

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Dictionary Says

Definition of 'Performance Fee'

A payment made to a fund manager for generating positive returns. The performance fee is generally calculated as a percentage of investment profits, often both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Investopedia Says

Investopedia explains 'Performance Fee'

The basic rationale for performance fees is that they align the interests of fund managers and their investors, and are an incentive for fund managers to generate positive returns. A "2 and 20" annual fee structure - a management fee of 2% of the fund's net asset value and a performance fee of 20% of the fund's profits - has become standard practice among hedge funds. Critics of performance fees, including Warren Buffett, opine that the skewed structure of performance fees - where managers share in the funds' profits but not in their losses - only tempts fund managers to take inordinate risks to generate high returns.  
Search results for

'Performance Fee'

  • Hedge Funds' Higher Returns Come At A Price

    http://www.investopedia.com/articles/mutualfund/08/hedge-fund.asp
    ... The management fee is charged in addition to a performance fee, which can
    only be collected by the manager if the fund makes money. ...

  • The Series 3 Exam: Creating A Career With Commodities

    http://www.investopedia.com/articles/professionaleducation/08/series-3-commodities.asp
    ... In exchange for all of this extra work, CTAs are able to collect a management
    fee and a performance fee. The management fee is typically ...

  • Are mutual fund performance numbers reported net of fees ...

    http://www.investopedia.com/ask/answers/07/mutual_fund_cost.asp
    ... two of which are deducted from a mutual fund's performance, which gives us its ... expressed
    as the expense ratio, and a marketing/distribution fee (referred to as ...

  • Hedge Funds: Higher Returns Or Just High Fees?

    http://www.investopedia.com/articles/03/121003.asp
    ... Typically, you pay a management fee (and maybe even a performance fee) to the fund
    manager in addition to fees normally paid to the underlying hedge funds. ...

  • What Is Private Equity?

    http://www.investopedia.com/articles/financial-careers/09/private-equity.asp
    ... The fee structure for private equity firms varies, but it typically consists of
    a management fee and a performance fee (in some cases, a yearly management fee ...

  • Series 6 Study Guide - Investment Companies - Performance ...

    http://www.investopedia.com/exam-guide/finra-series-6/investment-companies/performance.asp
    ... The management fee is the fee that is charged to the fund by ... Tracking Investment
    Company Securities Performance Mutual fund quotations are available in daily ...

  • Fund Of Funds - High Society For The Little Guy

    http://www.investopedia.com/articles/mutualfund/08/fund-of-funds.asp
    ... Just like an individual fund, an FOF may charge a management fee of 1% or more along
    with a performance fee, although the performance fees are typically lower ...

  • Why Financial Advisors Disagree

    http://www.investopedia.com/articles/financial-theory/09/why-financial-advisors-disagree.asp
    ... Hedge funds usually charge clients a performance fee, sometimes as much
    as 20% of the annual increase in the value of a portfolio. ...

  • What Investment Is Best For You?

    http://www.investopedia.com/articles/pf/08/money-manager-or-alone.asp
    ... was 1.56%. In that same year, the average performance fee was 19.6%. Some
    hedge fund managers charge even more for their services. ...

  • How To Make $1 Million In Finance

    http://www.investopedia.com/articles/financialcareers/08/make-million.asp
    ... compensation structure to private equity; hedge funds charge both an annual management
    fee (typically 2% of assets managed) and a performance fee (typically 20 ...

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