Although it is still far from common practice for mutual funds to charge performance-based fees, more are moving in that direction, the Associated Press reports.
Some evidently hope that the goodwill will boost sales and customer loyalty.
“When the investors are experiencing euphoria, they don’t mind and in fact welcome the opportunity to reward their advisers,” said Jeffrey Dunham, a principal with Dunham & Associates, which offers 11 funds, eight of which have fees tied to performance. “When the investors are feeling pain, they’re annoyed about paying fees for sub-par results. It creates a partnership where one does not exist today.”
In February, Fidelity Investments’ board decided to extend performance-based fees to 19 more of its funds, which shareholders still have to approve. Currently, 49 of Fidelity’s funds have such a structure.
“We have found it makes sense for shareholders because it more closely aligns our economic interests with theirs,” explained Fidelity spokesman Vincent Loporchio.
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.