Does the Booster Shielded Growth Fund charge a performance fee?
Yes — in addition to its annual fund charge.
Annual fund charge (on top)
1.41%
p.a. — the base ongoing cost
Verbatim from the Product Disclosure Statement
Performance fee payable where the combination of income before tax and fees (income return) and capital gains (total return) over the financial year ended 31 March is more than 5% above the New Zealand 90-day bank bill rate; 33% of excess income return payable in cash plus 10% of excess capital gains payable as bonus units in Tahi, subject to high-water mark. BIF performance fee: 20% of return above 10% p.a. hurdle, subject to high-water mark.
How to read a performance fee
A performance fee is paid only when the fund's return exceeds a hurdle benchmark — often the OCR plus a margin, or a market index. The fee is usually a percentage share of returns above the hurdle (commonly in the low double-digits) and is subject to a "high-water mark" so the same gain can't be charged twice. Many NZ MIS funds also impose a hard cap as a percentage of NAV so the perf fee can't run unbounded in a high-return year.
Performance fees vary year-to-year — a fund can show a high perf-fee number one period and zero the next, depending on whether it cleared its hurdle. The structural questions worth answering before investing are: What's the hurdle? (cash-rate hurdles are easier to clear than index hurdles) Is the high-water mark perpetual or annual? (perpetual = stronger investor protection) and Is there a cap? (cap = downside-bounded fee).