Management Fee Method Properties

This dialog is used to define the properties of a particular management fee method.

Name

Enter any name to use for this management fee method. This name will be displayed in the "Fee Method" column of the Management Fees report.

Method

No Fee:

The fees will be zero.

% of Beginning Value:

The fees will be a percentage of the managed value, where the managed value is calculated as the value at the beginning of the management fee report period. This is the same as the ending value on the day prior to the report's starting date.

% of Average Value:

The fees will be a percentage of the managed value, where the managed value is calculated as the average end of day value between the beginning and ending dates of the management fee report. Weekends are ignored, unless the option "Include Weekends in Average" is selected.

% of Ending Value:

The fees will be a percentage of the managed value, where the managed value is calculated as the value at the end of the management fee report period.

Fixed Fee:

The fees will be a specified amount, independent of the managed value.

% of Ending Value plus Performance:

The fees will be a combination of a percentage of the managed value plus fees based off the performance of the account. The performance fee portion uses a High Water Mark (HWM) and optionally a Hurdle Rate. See the details in the Performance Fee Calculations section.

Percentage

For any of the percentage of managed value methods this option controls that percentage. Choose from any of the following choices:

Fixed %:

The specified percentage is applied to the managed value.

Tiered %:

Varying percentages can be applied to the managed value, where the percentage changes at different value levels. When using the tiered %, an option to "Report Fees at Account Level" is made available. Select this option to have the calculated fees divided up proportionally between all sub-portfolios with an assigned account number. This option can be useful when you want to calculate the fees at a household level, but reported at an account level.

Fixed % by Investment Type:

Assign percentages for each investment type.

Performance Fee Calculations

When using the % of Ending Value plus Performance method you can charge management fees as a combination of fees on managed value (non-performance) plus fees based on performance. There are some important factors to be aware of when using this method:

The calculated performance fees assume the same methodology has been used since the specified starting date, you have not missed a billing period, and you have not billed for any partial billing periods. If you need to change the performance fee calculation options, create a new management fee method and specify the starting date and High Water Mark as of the date of the change.
If a performance fee cannot be calculated for any reason, the report will display "N/A". To determine the cause of the problem, see the menu command Help / Report Calculation Log... from within a Management Fee report.
The investment property "exempt from management fees" only applies to the non-performance portion of the calculated fees. The performance based fees always include all investments in the sub-portfolio.
When you assign a performance fee based method to a sub-portfolio, no sub-portfolio beneath that sub-portfolio can have an assigned management fee method
When running a Management Fee or Invoice report only the end date is meaningful (the beginning date is ignored). The beginning date is automatically determined based on the billing period and ending report date.

The following options are available when using the performance method. All percentages are entered as annual percentages.

Fixed % of Ending Value	The specified percentage is applied to the managed value. Enter as an annual percentage.
Performance Fee %	The specified percentage is applied to profits earned above the High Water Mark. For example, assume quarterly profits of $10,000 and a specified Performance Fee % of 10%. The performance fee for the quarter will be $1,000, which is 10% * $10,000.
Billing Period	Select the frequency that management fees are charged. Quarterly and Annual billing periods are supported. Calendar based periods are used. For example, annual billing periods always start on January 1. Quarterly billing periods start on the first day of January, April, July, and October.
Start Billing Method At
Portfolio Inception	Billing is started on the date of the first transaction in the sub-portfolio. The starting High Water Mark is zero in this case.
Selected Date	Billing is started on the specified date. Choose to either specify a starting High Water Mark or use the beginning market value on the specified date.
Hurdle	Choose whether or not to enforce a Hurdle Rate, and what type of Hurdle Rate to use. When using a Hurdle Rate the performance of the sub-portfolio must exceed that of the Hurdle Rate before a performance fee can be charged. Both "Soft" and "Hard" Hurdle Rate options are available. When using a Soft Hurdle Rate the performance fee % is applied to all profits earned. When using a Hard Hurdle Rate the performance fee % is applied only to the profits exceeding the Hurdle Rate. The Hurdle Rate can be a combination of a selected benchmark investment plus a fixed hurdle rate adder. When specifying the fixed portion of the hurdle rate the percentage is entered as an annual percentage. For example, if you choose to not use a benchmark rate investment and specify a 4% fixed Hurdle Rate %, a quarterly performance greater than 1% would be required to charge a performance fee.
Include Accrued Interest in Calculations	Includes accrued interest in the performance fee calculations, such as when determining the profits earned, and whether or not the Hurdle Rate was satisfied
Calculate HWM Assuming Fees Paid Externally	When calculating the High Water Mark (HWM) assume that fees are paid externally, and not deducted from the account. When fees are deducted from the account (this option is OFF), the HWM is reduced by the amount of the fees paid. Normally this option would be left off and you would keep track of your account fees paid in Fund Manager.

Performance Fee Calculations

See Also