In its latest FundIndustry Insight report, Lipper demonstrates that only 3% of unit trusts and Oeics now levying a performance fee. However, among absolute return funds this figure rises to 63.5% if offshore funds are included, 54% if locally-domiciled funds are considered.
This report is the fourth Lipper has produced looking at performance fees with 34 funds charging such a fee in 2007, rising to 81 in 2010 before dropping down to just 80 today. Some of the fall can be attributed to mergers and closures as much as a withdrawal of the performance fee.
As Ed Moisson, head of UK and cross-border research at Lipper commented: “Some of the comments made by asset managers at the time of these events reveal a mix of the classic reasons for fund closures – lack of a performance and/or lack of assets – and one can speculate that both aspects were adversely affected by having a performance fee in place.
“However one cannot conclude that these funds being closed is a direct result of performance fees being used.”
The Hargreaves Lansdown reference comes from the regularity with which senior figures at the firm have attacked the principle of fund groups paying managers a performance-related fee. Having said that, the firm is still happy to include those that do charge a performance fee and provide a good return in its Wealth 1250 list.
Moisson concluded: “While one cannot conclude that the use of performance fees will continue to decline, this research has shown that investors – albeit primarily through their advisers – can have a very real influence on the fees being charged by funds.
“At the same time it seems much more likely that most of the new launches using performance fees will come from ‘offshore’ rather than locally domiciled funds.”
