Performance Fees

Participants who need to understand how performance fees are calculated, allocated and accounted for using the equalisation credit method and the series of shares method.  Participants should already be familiar with the basics of net asset valuations (NAVs) and how a fund processes subscriptions and redemptions.

At the end of this session participants will be able to

• Describe what is meant by Gross Asset Value and calculate a basic performance fee.
• Calculate a performance fee in a period after a fee has crystallized and calculate a performance fee incorporating a hurdle rate.
• Discuss why the correct accounting and allocation of performance fees amongst investors is important.
• Calculate and allocate performance fees using the Series of Shares method.
• Calculate equalization credits and convert an equalization credit balance to shares.
• Calculate an additional performance fee*; and convert an additional performance fee to a redemption of shares.
• Describe how equalization credit and additional performance fee balances can change over time; and describe what happens upon redemption under the equalization credit method.
• Also known as equalization debit, contingent redemption or contingent liability.