Hermes Fund Managers introduced a new performance fee structure in which clients pay on a rolling three-year period rather than on a one-year basis, according to an e-mail response from a company spokesman.
“This is a longer-term alignment with the clients’ needs, and seeks to avoid the situation with one-year performance fees that can encourage fund managers to take undue risk,” he said in the e-mail.
Hermes had £21.6 billion ($33.7 billion) in assets under management as of Sept. 30, mostly on behalf of the London-based £31.3 billion BT Pension Scheme. The firm has introduced a number of initiatives to gain third-party assets, including an expansion in the U.S. last year.
For segregated investors and pooled fund investors with fees paid by invoice, performance fees will be divided into three annual charges, with the second and third installments contingent on Hermes achieving its target returns.
For pooled fund investors required to pay the full one-year performance fee upfront, one-third of the payment would go to Hermes with the remainder in an escrow account. If Hermes does not achieve its performance targets in the second or third year and the client decides to redeem, the money for the non-performing periods will be returned to them, according to the statement.