Does the Booster Wealth Geared Growth Fund charge a performance fee?
Yes — in addition to its annual fund charge.
Performance fee paid last period
0.01%
of NAV
Annual fund charge (on top)
1.35%
p.a. — the base ongoing cost
Verbatim from the Product Disclosure Statement
A performance fee is payable to us, as manager of BIF, where the BIF's return is in excess of 10% p.a. which approximates the 30 year New Zealand equity market return. The fee is only payable for returns in excess of the hurdle rate after any prior year losses have been covered. 20% of the return above the hurdle rate is payable as a performance fee.
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).