Performance incentives used to be the bastion of the senior executive, but now the concept is filtering through to funds management groups.
Performance incentives used to be the bastion of the senior executive, but now the concept is filtering through to funds management groups.
Macquarie Property Investment Management has rolled out a new fee structure for three of its listed property trusts which rewards the manager if it significantly out-performs its peers and punishes the group if it fails to match its competitors on per-formance.
While most fund managers are charging about 0.5 per cent for managing a listed property trust, Macquarie has dropped its base management fee by between 0.4 and 0.55 per cent. On top of the base, Macquarie will charge a fee for outperforming like funds by more than 2 per cent. This fee is 0.15 per cent for every 1.0 per cent of outperformance. Macquarie will only retain its current fee if it outperforms the particular benchmarks by more than 2.8 per cent.
Head of MPIM, Stephen Girdis, says the group is the first listed trust manager to switch to performance-based fees.
“The move is the result of a 18 month review designed to add more rigour to our process,” he says.
“The three prongs to the refinement of our process are: taking a sector specific ap-proach to the structure of our trusts; adding rigour to the management process; and as a consequence of the other two reflecting the rigour with a performance based fee.”
Girdis says the group is trying to align the focus of MPIM to that of its clients. For example, among its clients are fund managers operating balanced or property secu-rities funds. These managers are charging performance-based fees for their services to superannuation funds and institutional investors.
