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Calculate fund performance fee

Performance fee is calculated as percentage of gains made by the fund. The fee calculation can be based on:

  • Benchmark:

    Equation 19. 
    PFEE=(FundReturn-BenchmarkReturn)/PFEE%PFEE=\left(FundReturn-BenchmarkReturn\right)/PFEE\%


  • Hurdle rate and hight-water mark

    • High-water mark (HWM) – The highest NAV value in the share class set on crystalization date.

    • Hurdle rate – The minimum NAV increase above HWM starting from which the performance fee is paid.

    Equation 20. 
    PFEE=(NAVwithoutperformancefee-HurdleRate)/PFEE%PFEE=\left(NAV_{withoutperformancefee}-HurdleRate\right)/PFEE\%


Set up, accrue and capitalize performance fee for a fund

To set up performance fee calculation for a fund share class:

  1. Define the benchmark or hurdle rate to use. Open the Portfolio window in FA Back:

    • Hurdle rate is defined as a Cost type in the Fees tab.

    • Benchmark is defined in the Benchmark tab.

    For details, see Portfolio window.

  2. (Optional) Define the fund account to use for fee capitalization in the Portfolio window, Accounts tab in FA Back. Mark the account with the "Fee capitalization" tag in the Other tags field.

    If you don't define the fee capitalization account, the system uses the default cash account you specified in the fund settings in FA Fund Management.

  3. Choose the fee formula and define the fee percentage. Open FA Fund Management, go to the share class settings, Fee structure tab and fill in the fee details. Available fee formulas are:

    • Accrued performance fee based on NAV and hurdle rate (ACT/365)

    • Accrued performance fee based on NAV and hurdle rate (ACT/ACT)

  4. (Optional) Define the crystallization schedule in the fund settings, Schedules tab.

You can track the accrued fee in the NAV overview. On the crystallization date, FA Fund Management creates transactions to capitalize the accrual: a withdrawal transaction from the fund's cash account and a deposit transaction to the fund's fee account.

Set up performance fee equalization

Performance fee with equalization ensures that every shareholder pays the same percentage of performance fee no matter when they subscribed to the fund.

For the fee equalization, the fund subscriptions are executed with NAV excluding the performance fee. To equalize the performance fee in the future, FA Fund Management creates compensation trade orders for buying or selling fund units. The trade order type depends on the current share class NAV (without performance fee) compared to the high-water mark (HWM) - the highest NAV value in the share class:

  • If NAV (without performance fee) is smaller than HWM, a trade order with Equalization debit (EQDE) transaction type is created.

  • If NAV (without performance fee) is greater than HWM, a trade order with Equalization credit (EQCR) transaction type is created.

The trade amount is calculated as subscription amount * performance fee per unit.

On the crystallization date, when you accept NAV:

  • HWM is updated to the NAV value if the current NAV is higher than HWM.

  • The compensation trade orders are executed.

To set up the performance fee with equalization, you need to specify the schedule for the fund and enter the fee details on the share class level:

  1. Open the Fund wizard (Add fund or Edit fund edit.png button) and specify the following settings:

    • In the Schedules tab, set the fee crystallization schedule. For a newly created fund, the first fee date in the schedule must be the same as the fund inception date you entered in the Basic info tab. If you transfer an existing fund into FA Fund management app, make sure that the first fee date is the crystallization date.

    • In the Fee structure tab, select Calculate performance equalization fee with contingent redemption method. The "Performance fee with crystallization" formula is used to equalize the performance fee on the crystallization date.

    For details and field descriptions, see Create a fund.

  2. Open the Share class wizard (Add share class Screenshot_2024-04-15_at_11_49_11.png or Edit edit-fund-group.png button) and specify the fee properties in the Fee structure tab, Perfomance fee equalization section.

    For details and field descriptions, see Performance fee equalization).

FA Fund management app accrues the performance fee every time you calculate and accept NAV. On the crystallization date, when you calculate and accept NAV, FA Fund management calculates performance fee and creates compensation trade orders. You can view the fee amount in the NAV window.

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