Does the Milford Australian Absolute Growth Fund charge a performance fee?
Yes — in addition to its annual fund charge.
Performance fee paid last period
0.25%
of NAV
Annual fund charge (on top)
1.05%
p.a. — the base ongoing cost
Verbatim from the Product Disclosure Statement
15% of returns above OCR plus 5% hurdle rate (after deduction of base fund fee but before tax and performance fee), subject to high water mark (the Fund's previous highest ever net asset value per unit, exclusive of all distributions paid since the last crystallisation date), with a performance fee cap of 0.95% of average NAV.
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).