A pioneer in fund cost calculation in Europe, from 1996, Hugues developed Fitzrovia International alongside Paul Moulton before selling their well-respected business to Lipper. After 4 successful years as Head of New Ventures at Thomson Reuters, Hugues setup FITZ Partners. He has supported Working Groups on fund expenses for INREV, ALFI or now EIOPA, and spoken at diverse asset management events. He gained an MSc in Finance from Strathclyde University in Scotland and a degree in European Business Studies from Group ESC Bordeaux in France.
UCITSindex.com: Fitz Partners provides fund fees benchmarking analysis. Can you explain how it works?
Hugues Gillibert: This is correct, Fitz Partners delivers fund fees and expenses benchmarks. In order to create relevant and quality benchmarks we calculate our own fund fee data. We do not collect any fee data from asset managers or from published marketing materials but, for each and every 19,000 share class in our database we have calculated their fees from the funds audited accounts. Our methodology is consistent across all products and domiciles and allows access to detailed fee breakdowns providing accurate and in-depth fee benchmarking analysis.
UCITSindex.com: While calculating all these fees, do you come across performance fees, too?
Gillibert: Yes we do. The same way that most funds would disclosed in their expense accounts the exact amount of say administration or custody expenses charged over the latest accounting period, we would also come across the total amount of performance fees that would have been charged. This fee, like any others are paid from the assets of the funds and would add to the total expenses of the fund although they are not included in the regulated Ongoing Charge figures (OCF) or TERs calculations.
UCITSindex.com: How frequent do you see performance fees?
Gillibert: It is certainly not an unusual occurrence in our cross border universe. To give you a proper answer first we would need to differentiate between funds that do have a performance fee structure in place and those which have performed well enough to trigger a performance fee (expense). Out of our European cross-border database around 13% of the funds have a performance fee in place but only 7.5% of the total funds have charged a performance fees during their latest accounting period!
UCITSindex.com: What ist he typical size of these fees?
Gillibert: In absolute terms, the amount actually charged to funds as a performance fee expense, over the latest accounting period, averages USD 561,000 per share class. In percentage terms, over the year 2014, it varied between 0.01% and 3.50% of the funds’ assets.
UCITSindex.com: What about the performance fee structure itself, do you have any visibility on this at all?
Gillibert: Yes we do record each and every performance fee structure we come across in a “standardised” template. As you know these fee structures are far more complex than people usually think, most cross-border funds would not often put in place a straight “2 and 20” fee structure as is often the case in the hedge fund world. We have to record a multitude of variables such as high-water marks, number of benchmarks, types of benchmarks, details of clawbacks, crystallisation period etc… in order to offer our clients a meaningful performance fee benchmarking tool. They can then review their fee structures against their competitors’ or in a case of product development, choose to follow existing performance fee structures currently in existence in the market.
UCITSindex.com: Thank you for the interview