A performance fee is a charge paid to the fund manager when the fund's return exceeds a defined benchmark or hurdle, usually calculated as a share of the outperformance.
Why it matters
Performance fees are meant to align the manager's interests with those of investors, but they also reduce the investor's share of good results. In long-term funds that hold real estate or other illiquid assets, performance often depends on valuations, so the method and timing of the calculation matter.
What to watch for
Read how the fee is calculated: the benchmark or hurdle, the calculation period, whether past losses must be recovered first and whether the fee is based on valuations or on realised results. Check how it appears in the cost section of the KID. See ELTIF fees explained and how properties are valued.
General information. Not investment advice or a suitability assessment.
