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A review of performance fee calculation methodology, accounting and challenges.
At the end of this course participants will be able to
- Describe what is meant by Gross Asset Value and calculate a basic performance fee.
- Calculate a performance fee in a period after a fee has crystallized and calculate a performance fee incorporating a hurdle rate.
- Discuss why the correct accounting and allocation of performance fees amongst investors is important.
- Calculate and allocate performance fees using the Series of Shares method.
- Calculate equalization credits and convert an equalization credit balance to shares.
- Calculate an additional performance fee*; and convert an additional performance fee to a redemption of shares.
- Describe how equalization credit and additional performance fee balances can change over time; and describe what happens upon redemption under the equalization credit method.
*also known as equalization debit, contingent redemption or contingent liability.
Course Content (Summary)
- Introduction to performance fees
- High water marks
- What’s the problem with performance fees
- Equalization credits
- Additional performance fees
- Accounting for performance fees
- More challenges
- Other methods – series of shares
Who should attend?
- Fund accountants, trustees, auditors.
- Investor services teams will also benefit.