RECENT moves by a handful of fund managers to offer performance-based fees are a welcome development. Hopefully, others will embrace the trend. But the new fee structures need to be designed to ensure that portfolio managers have enough skin in the game to be truly in sync with the interests of those whose money they steward.
Fidelity International (the international arm of Fidelity Investments until becoming independent of its US parent in 1980) provided a diagram of its new fee structure this week, without specifying actual levies.
As I suggested earlier this week, I would go further. Here's how.
At some level of underperformance versus the benchmark, the fund manager should earn nothing in fees....
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