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Forsyth Barr drops performance fees

Forsyth Barr is hoping to simplify things for investors by dropping its performance fees on two funds.

Tuesday, August 16th 2016, 5:59AM

It will no longer charge performance fees for its New Zealand equities and Australian equities funds if they beat the annual 10% return hurdle. Those were its only funds that had performance fees.

The changes have come into effect as Forsyth Barr responds to the new Financial Markets Conduct Act licensing regime for fund managers. The FMCA introduces more prescriptive requirements about the information that is offered to investors.

Forsyth Barr earned just under $1 million in management fees in the year to March 31.

Earlier this year, the FMA told fund managers that they needed to clarify information to investors around performance fees.

An information sheet was issued that said managers would need to make it clear if a client could end up paying a performance fee twice for the same return if the fund did not use a high-water mark.

The FMA also offered guidance on the indexes performance fees were tied to.

“The market index used must appropriately reflect market movements in the types of assets that the fund invests in,” it said.

“Although not a legal requirement, it is reasonable to link the hurdle rate for any performance-based fee to the returns of the comparative index.  Some funds currently base their performance fee on a hurdle rate of return linked to a market index that does not reflect the asset class and risks of the underlying investments.”

Tags: Performance fees

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