Performance fee
An additional fee a fund manager charges only when fund performance exceeds a defined benchmark or hurdle rate, typically subject to a high-water mark.
A performance fee is an extra layer of fee that a fund manager charges only when fund returns exceed a defined benchmark or hurdle. Common structures: a percentage of returns above the NZ 90-day bank bill rate, above an equity benchmark like the S&P/NZX 50, or above a fixed hurdle (e.g. 6% p.a.).
Most NZ funds with performance fees apply a "high-water mark" — the manager only earns a performance fee when the fund's value exceeds its previous peak after the last performance fee was charged. This prevents charging twice for recovering past losses.
Performance fees are disclosed separately from the annual fund charge in the QFU and PDS. Two funds with the same headline annual fund charge can have very different total cost-to-investor outcomes if one charges performance fees and the other does not.
Related terms
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AFC · Total fund charge · MER
Annual fund charge
The total ongoing percentage charge paid out of a NZ managed fund each year — covering management fees, supervisor/custodian fees, audit, and other operating costs.
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QFU · Fund Update
Quarterly Fund Update (QFU)
A standardised FMA-mandated quarterly report each NZ retail managed fund publishes, summarising fees, returns, risk indicator, asset mix, top-10 holdings and fund size.
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PDS
Product Disclosure Statement (PDS)
The headline legal document a NZ managed fund or KiwiSaver scheme provides to retail investors, summarising the fund, fees, risks, and how to invest.