ESMA · ESMA_QA_2174 Answer Published
Performance fees
- Regulation
- Alternative Investment Fund Managers Directive (AIFMD) Directive 2011/61/EU
- Article
- ESMA guidelines on performance fees in UCITS and certain types of AIFs
- Topic
- Costs and fees
- Submitted
- 2024-05-08
- Answered
- 2024-05-24
Question
Where a manager applies an additional reference indicator to the performance fee model (e.g.: a hurdle rate on top of the High-Water Mark model or the benchmark model), should the minimum performance reference period be applied to the additional reference indicator?
Answer
The minimum performance reference period in accordance with paragraph 40-42 of the Guidelines should be applied to the performance fee model. However, the manager is not required to apply the minimum performance reference period to the additional reference indicator, considering that (a) the final combination (i.e.: the performance fee model plus the additional reference indicator) does not result in increased fees for investors compared to the use of the performance fee model alone and (b) the performance fee model (excluding the additional reference indicator) is consistent with the fund’s investment objectives, strategy and policy, in line with Guideline 2. In line with paragraph 46 of guidelines, appropriate disclosure should be provided in the prospectus.
This Q&A is published by European Securities and Markets Authority and is non-binding. It does not constitute legal advice. Updated weekly from official ESA sources.
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