To earn our performance fee, every six months the fund has to increase in value and beat 2 key benchmarks:
1. The Bank of England base rate. (This is the kind of rate you could earn on a very high interest savings account – something we are definitely aiming to beat!)
2. The unit price at the start of the six months* – our High Water Mark (HWM).
When we do succeed, our fee is 20% of whatever out-performance we deliver, above the Bank of England rate.
For example, say the Bank of England rate is 6% and we grow the fund by 11% over the six months. That’s 5% out-performance, of which we get 1% and your fund gets 4%. Add back on the Bank of England rate, leaving your fund with 10% growth overall. That’s roughly how it works.
Once the HWM goes up, that becomes our new benchmark, incentivising us to constantly out-perform it every six months. If we don’t beat our last HWM and the Bank of England rate, we don’t earn a performance fee. And if the unit price at the start of the six months is lower than the previous HWM, the previous HWM will continue to apply.
*If you buy more units half way through the six months, we set the High Water Mark for those units at the price you bought them. For a fuller explanation of how the performance fee is calculated, please read the Simplified Prospectus for this fund.
