(February 5, 2010) — Hermes Fund Managers is extending its performance fee clawback provision to all of its products, which include real-estate and private equity offerings, aiming to attract about £15 billion from third parties over the next five years.
According to Reuters, the fund instituted the policy at its hedge fund business Hermes BPK Partners last year. The UK firm, owned by British Telecom’s pension fund, said its new structure “seeks to avoid the situation with one-year performance fees, which can encourage fund managers to take undue risk,” reported Professional Pensions. Under the provision, performance fees are to be paid over three years and waived if the fund underperforms.
The fund was motivated to extend the clawback policy to the entire firm following the financial crisis, when investors were critical about receiving nothing in return when funds underperformed.
“We are not going to receive the performance fee in one lump sum. We receive a third only,” Chief Investment Officer Saker Nusseibeh told Reuters. “Only if we meet or beat benchmark the following year, do we receive the next third and again for the following year.”
To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742