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Set up a management fee

A management fee is calculated as a percentage of NAV:

Equation 22. 
MFEE=NAV⋅DaysInPeriodDaysInYear⋅Fee%100MFEE=\frac{NAV\cdot DaysInPeriod}{DaysInYear}\cdot\frac{Fee\%}{100}


  • NAVNAV is the NAV of the fund over the period. You can choose to use the previous NAV or the newly calculated NAV. Also, some of the pre-defined fee formulas allow you to use GAV as the calculation base.

  • DaysInPeriodDaysInPeriod is the number of days in the period (taking into account the holiday calendar in the fund or share class settings.

  • DaysInYearDaysInYear is the number of days in the year calculated based on the day count convention you define in the fee settings.

  • Fee%Fee\% is the yearly management fee percentage.

Example: The yearly management fee is 0,1%. The fund's previous NAV is 365 000 EUR. The used day count convention is "ACT/ACT ISDA" and the selected holiday calendar is "Saturday/Sunday weekends". The calculated fee is 365 000 EUR * 0,1% / 365 days * 1 day = 1 EUR. If we change the holiday calendar to "No holidays/weekends", the fee is calculated for all three days and amounts to 3 EUR. 

To define a management fee for a fund or a share class, you need to:

Choose or create a fee formula

Fee formulas determine the calculation parameters. You can choose one of the standard configurations or create your own formula if the pre-configured ones don't suit you.

Choose a standard fee formula

To check the list of formulas configured in your FA Fund Management application:

  1. Open the NAV status view.

  2. Click the gear icon gear.png in the top-right and choose Fee formulas.

Read through the formulas and see if any of them suits your case.

The standard formulas that come with the installation are listed in the table:

Formula

Description

Transaction type

Accrued management fee (ACT/ACT)

Management fee with fixed annual percentage. The calculation is based on the end-of-period NAV and uses the ACT/ACT day count convention.

Management fee, MFEE

Accrued management fee on end of period GAV (ACT/365)

Management fee with fixed annual percentage. The calculation is based on the end of period GAV. GAV includes:

  • Market value of investments including accrued interest

  • Cash balance

Management fee, MFEE

Accrued management fee on end of period GAV (ACT/ACT)

Management fee with fixed annual percentage. The calculation is based on the end of period GAV. GAV includes:

  • Market value of investments including accrued interest

  • Cash balance

Management fee, MFEE

Accrued management fee with daily transactions (ACT/ACT)

Accrued management fee with fixed annual percentage. This fee formula is a variant of "Accrued management fee (ACT/ACT)" that creates a separate fee transaction for each date during the calculation period.

Management fee, MFEE

Create a fee formula

To create your own fee formula:

  1. In the NAV status view, click the gear icon gear.png in the top-right and choose Fee formulas.

  2. Click Add formula and fill in the fields:

    Formula name

    The name of the formula. You will see it when you choose the fee formula in the fund or share class settings.

    Code

    The formula code to identify the fee formula in the system.

    Fee type

    Fee type. Select "Management fee".

    Transaction type

    Transaction type to use for the fee accrual: choose "Management fee (MFEE)".

    Create daily transactions

    Create a fee transaction for each day of the calculation period (by default, FA Fund Management creates one summed fee transaction per calculation period).

    Day count convention

    The day count convention to define the number of days in a year.

    Calculation base

    NAV to use for the fee calculation: previous (for the previous period) or current (newly calculated).

    Exclude cash in base

    Exclude account balances when calculating the average market value. By default, all account balances are included.

    Description

    Fee formula description.

  3. Save the changes.

Define the fund or share class fee

The next step is to define your fund's fee structure. You can specify the fee formula on the fund level (it is applied to all share classes) or on the share class level. Fund-level fees are calculated first, in the order you place them in the fund settings, followed by the share class fees.

To define the fee parameters:

  1. In the fund settings, define the fee account, calculation and crystallization schedule:

    • Set the fee capitalization account in the Accounts tab. Enable Set as fee capitalization account for the cash account you want to use for fee capitalization. You can only set one account for fee capitalization per fund. If you do not set a fee capitalization account, the system uses the account you marked as the default account in the Accounts tab.

    • (Optional) If you want to use a separate schedule for calculating fees ( see Ongoing fees for details), set it up in the Schedules tab.

    • Define the fee crystallization schedule in the Schedules tab. For details about schedule settings, see Create a fund.

  2. Add the fee formula on the fund or share class level. Open the Fee structure tab in the fund or share class settings, add the fee formula, percentage and other parameters (for details about fee parameters, see Create a fund and Add share classes).

After you set up fee calculation and capitalization, accrued fee transactions are created every time you calculate NAV. When it is time for capitalization, go to FA Back and create transactions to withdraw the fees from the fund cash account and deposit them to the fund fee account. Follow the instructions in Handle accrued fees and capitalization in FA User guide.

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