Posted inBusiness moves

Fidelity switches to performance-based fee model

Fidelity International is the first major asset manager to make a switch to a “value for money” charging structure. The asset manager will give money back to clients when its funds underperform.

The asset manager will introduce new share classes charging a lower base management fee, and it will instead “share in the upside” when outperformance is delivered. On the other hand investors will get a discount when funds underperform over a rolling three-year period (see below for an explanatory graphic).

Fidelity aims to introduce the new charging structure next year, “with some clients able to benefit from this model as soon as January 2018,” a Fidelity spokesperson told FSA‘s sister publication Expert Investor.

Brian Conroy, president, Fidelity International, said: “We want to demonstrate real commitment to our active management capability. We will move away from a flat fee model and get paid according to how well we do for our clients.”

He added: “These changes will more closely align the performance of our business with the performance of our clients’ portfolios and deliver what we believe clients and regulators are looking for. Our fee structure will give back for underperformance of the benchmark, whereas others do not.”

The move comes just weeks after Morningstar urged asset managers to switch to a performance-based charging structure.

Part of the Mark Allen Group.