Configure a fee formula

The standard fee formulas offer extensive configuration options to configure the calculation for your specific use case. Follow these steps to take fee formulas into use:

Choose the fee formula you want to configure. Go to the Fees tab in the Portfolio window and add the "Configurable management fee" or "Configurable performance fee" in the Cost formula field. For details on linking formulas to the portfolios, see Calculate feesin FA Back reference.
Define the fee calculation parameters. Go to the Fee configurations tab in the Portfolio window and choose one of the options:
Add new fee configuration – Define fee parameters from scratch.
Fee transaction type – choose the fee formula: "Management fee (MFEE)" or "Performance fee (PFEE)".
Fee type – select the fee types. See Calculation details for different fee typessection below for details on the settings and calculation specifics.
Use fee configurations from – Use configurations defined in another portfolio.
Select Generate calculation breakdown as .xlsx file to save fee calculation details as an XLSX file in portfolio documents after each calculation. This file can be useful for examining any potential issues in the calculation. You can also select Generate calculation breakdown into transaction internal info or Generate calculation breakdown into transaction description to save a summary in the created transactions' Internal info or Description field.

The fee configurations are saved when you save the portfolio. Use the steps detailed in Calculate management and performance fees to calculate the fees. If you selected Generate calculation breakdown as .xlsx file earlier, you can use the generated XLSX file (in the portfolio documents) to verify and examine the calculation results.

Calculation details for different fee types

You can select from four different fee types configuring the fee formula. This section provides details on the exact calculation logic behind all four types and their configurations.

Fixed fee

A fixed fee is based on a fixed amount, regardless of the fee period. This fee type contains one setting:

Fixed fee amount (in portfolio currency): The amount of the fee transaction in portfolio currency.

Periodic fixed fee

Periodic fixed fee is a yearly fee with a fixed amount per year. Define the following settings:

Yearly fixed fee amount (in portfolio currency)

Fee yearly fixed amount in portfolio currency.

Day count convention

The day count convention used to define the number of days in a year and calculate the daily fee amount from the specified yearly fee. For more information about day count conventions, see the Opengamma site.

Example: The yearly fixed fee amount is 365 EUR. We are use day count convention "ACT/ACT ISDA", and calculate fees for the period from 4 Mar to 6 Mar 2023. The calculated fee is 365 EUR / 365 days * 3 days = 3 EUR.

Periodic relative fee

Periodic relative fee depends on the market value of the portfolio. Each day in the calculation period the portfolio market value is multiplied by the fee percentage, and that resulting yearly fee is divided for the given day with the specified day count convention. Finally, the fee amounts from each individual day in the fee calculation period are summed together to create the fee transaction. You can adjust the calculation details with the following settings:

Day count convention

The day count convention to convert dates to a numeric representation in order to calculate the fee amount. For more information about day count conventions, see the Opengamma site.

Holiday calendar

The days during the calculation period for which the fee is calculated. For details on different holiday calendars, refer to the Opengamma site.

Example: The yearly fee percentage is 0,1 %. Market value of the portfolio is 365 000 EUR during the whole calculation period from Sat 4 Mar 2023 to Mon 6 Mar 2023. The used day count convention is "ACT/ACT ISDA" and the selected holiday calendar is "Sat/Sun". The calculated fee is 365 000 EUR * 0,1 % / 365 days * 1 day = 1 EUR. If the selected holiday calendar would be "NoHolidays", then the fee would be calculated for all three days, and the fee would be 3 EUR.

Minimum fee

Minimum fee amount. The value is applied as-is to the final fee calculation result, and if the calculated fee amount is less than the specified minimum fee, the minimum fee is used as the fee transaction amount instead.

Fee percentage type

Fee percentage: single or AUM-based. For Single fee percentage, define the Yearly fee percentage, to specify the yearly percentage used in the calculation. For AUM threshold-based percentage, you can add any number of AUM thresholds and define the fee percentage. Choose Use stepwise fee calculation to calculate the fee for each threshold separately. If you leave this setting unselected, the fee percentage from the threshold matching portfolio market value is used for the whole market value.

Example 1: There are two AUM thresholds specified: 1) From 0 EUR to 365 000 EUR with fee percentage 1 % and 2) From 365 000 EUR upwards with fee percentage 0,5 %. "Use stepwise fee calculation" is left unselected. Portfolio's market value is 730 000 EUR. The applied fee percentage in the calculation would therefore be 0,5 %, since that is the fee percentage of the AUM threshold matching portfolio's market value.

Example 2: All the settings are equal to the Example 1, but the "Use stepwise fee calculation" is selected. The yearly fee would now be 365 000 EUR * 1 % + (730 000 EUR - 365 000 EUR) * 0,5 % = 5475 EUR, making the effective fee percentage 0,75 %.

You can also specify the Thresholds' currency for the AUM threshold-based percentage. If something else than Portfolio currency is selected, the thresholds are converted from the given currency to the portfolio currency before they are compared against portfolio's market value.

Use calculation date's market value

Use only the market value from the calculation date when calculating the fee. If you choose this option, the market value changes during longer fee calculation periods don't affect the calculated fee.

Use clean market value

Exclude positions' accrued interest and accruals from the market value used in the calculation.

Exclude short positions

Excludes negative-valued positions from the market value used in the calculation.

Include subportfolios

Take the subportfolios' market values also into account when calculating the fee (other settings affecting market value calculation are applied to subportfolios as well).

Apply security-specific fee percentage when available

If selected, security-specific fee percentages are used for securities with "Management fee percentage (%)" defined under "Cost info". Such positions are excluded from the market value used for AUM thresholds and the calculation using portfolio-specific percentages.

Exclude accounts with tag, Exclude securities with tag

Exclude any accounts/securities having the configured tag from the market value.

Create the fee in subportfolio with tag

Create the fee transaction in a specific subportfolio instead of the parent portfolio. If no subportfolio with the given tag is found, the fee is created in the parent portfolio.

Performance fee

Performance fee amount depends on the performance of the portfolio compared to a benchmark or specific hurdle rate. For each day in the calculation period the performance of the portfolio is compared to the benchmark/hurdle rate, and the difference in the performance is multiplied by the performance fee percentage. The daily fees are summed together to get the total amount for the fee transaction.

Performance fee percentage

Fee percentage to use for calculating the fee.

Compare performance against

The reference for the portfolio performance: hurdle rate or portfolio benchmark. With Hurdle rate, you need to specify the fixed yearly rate applied for the performance calculation, and the Day count convention used to calculate the daily hurdle rate from the specified yearly rate. With Portfolio's benchmark, you don't need to specify settings, but you need to have a benchmark defined for the portfolio.

Example 1: You have specified the performance fee percentage 1 % and hurdle rate 5 % with day count convention Act/Act ISDA. At the beginning of the calculation period the portfolio was valued at 100 000 EUR. During the three-day calculation period, the market value first rose 1000 EUR, then decreased 500 EUR and on the third day rose 700 EUR. The daily hurdle rate can be calculated as (1,05 ^ (1/365)) - 1 = 0,00013368, and therefore the daily "benchmark" changes are 100 000 * 0,00013368 = 13,368, 101 000 * 0,00013368 = 13,502 and 100 500 * 0,00013368 = 13,435. Thus, the daily performances are 1000 EUR - 13,368 EUR = 986,632 EUR, -500 EUR - 13,502 EUR = -513,502 EUR and 700 EUR - 13,435 EUR = 686,565 EUR, and the respective daily fees are 9,86632 EUR, -5,13502 EUR and 6,86565 EUR, totalling 11,60 EUR.

Example 2: Instead of having the performance of +700 EUR on the third day, as in Example 1, you have performance of -700 EUR. This would lead to total fee of -2,13 EUR, and since negative fees are not charged, the fee transaction would be made with amount 0.

Example 3: You have the same performance of the portfolio as in Example 1, but you are comparing against portfolio's benchmark. On the first day the benchmark rose 0,9 % , then decreased 0,3 % on the second day, and finally on the third day rose 0,5 %. The respective daily benchmark changes would therefore be 100 000 EUR * 0,9 % = 900 EUR, 101 000 EUR * -0,3 % = -303 EUR and 100 500 EUR * 0,5 % = 502,5 EUR. Thus, the daily performances are 1000 EUR - 900 EUR = 100 EUR, -500 EUR - -303EUR = -197 EUR and 700 EUR - 502,5 EUR = 197,5 EUR, and the respective daily fees are 1 EUR, -1,97 EUR and 1,98 EUR, totalling 1,01 EUR.

Use high-water mark, Track negative accrued fee

Apply high-water mark in the performance calculation. These settings should be used together. When both settings are selected, the performance fee is only charged if the portfolio value goes over the high-water mark.

Example 4: You have the same setup as in the Example 1, but you have "Use high-water mark" and "Track negative accrued fee selected". The high-water mark is set on 100 000 EUR at the beginning of the calculation period. At the end of the calculation period, the market value of the portfolio is 101 200 EUR which is greater than the high-water mark. Therefore, the fee of 11,60 EUR is charged and the new high-water mark is set at 101 200 EUR.

Example 5: Instead of having the performance of +700 EUR on the third day, as in Example 4, you have performance of -700 EUR. This would lead to total fee of -2,13 EUR , and since negative fees are not charged, the fee transaction would be made with amount 0. Additionally, since the market value of the portfolio would be 99 800 EUR at the end of the calculation period, the high-water mark would not have been breached and it would stay at 100 000 EUR.

Calculate benchmark over the whole period

Modify how the benchmark performance is calculated. When this setting is selected, individual days' benchmark changes are calculated from benchmark values instead of portfolio values.

Example 6: Having the same setup as in Example 3, if "Calculate benchmark over the whole period" is selected, the benchmark values would be 100 900 EUR at the end of the first day, 100 900 EUR * (1 - 0,3%) = 100 597,30 EUR at the end of the second day, and 100 597,30 EUR * (1 + 0,5 %) = 101 100,29 at the end of the third day. Therefore, the changes in the benchmark would be +900 EUR, -302,7 EUR and +502,99 EUR, and the daily performances 1000 EUR - 900 EUR = 100 EUR, -500 EUR - -302,7 EUR = -197,3 EUR and 700 EUR - 502,99 EUR = 197,01 EUR. This would lead to daily fees of 1 EUR, -1,97 EUR and 1,97 EUR, totalling in 1 EUR.