Does the Booster Wealth Moderate Fund charge a performance fee?
Yes — in addition to its annual fund charge.
Annual fund charge (on top)
0.74%
p.a. — the base ongoing cost
Verbatim from the Product Disclosure Statement
Tahi: performance fee payable where total return over 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, 10% of excess capital gains payable in bonus units, subject to high-water mark. BIF: 20% of return above 10% p.a. hurdle rate, 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).