Fund manager performance fees under fire

The subject has been in the spotlight recently, with the Financial Markets Authority issuing guidance on what it considers "reasonable" in terms of performance fees for KiwiSaver funds.

Harbour's report examined ten equity funds offered in the New Zealand market and found a number of concerns with the way performance fees were structured.

"Performance fees have the potential to be the highest fee paid by retail investors yet they may not even know they are paying them or how much they are paying," the report said.

"Performance fees can reward fund managers for a job well done. The theory is that when the investor benefits from strong investment performance, the fund manager can also share in their success - a seemingly win-win situation.