From April, Japan’s $1.4trn (£1trn, €1.1trn) Government Pension Investment Fund will pay fund managers for alpha generated through a performance fee, the Financial Times reported on Sunday.
“Without excess returns, their fee must be equal to that of passive managers with the same amount of asset size,” the pension fund said.
Fidelity International, which this year introduced a variable fee model based around performance, is among the fund houses running active strategies for the Japanese pension fund.
However, others, such as Amundi, Schroders, Invesco, Eastspring, Nomura, JP Morgan Asset Management and UBS use traditional ad valoreum fees based on assets under management – where the fee is proportional to the estimated value of the goods or transaction concerned.
Brocklebank described the move from the pension fund as a “milestone for the way the industry is evolving”.
In December, AllianzGI launched a suite of funds with fees that will go to zero if they do not deliver alpha over a 12-month rolling period. Alliance Bernstein runs a range of funds in the US with fees linked to performance.
“Now what we’re seeing is a huge pension fund trying to push asset managers in that direction,” Brocklebank said. Orbis has offered performance fees for four years.
“Advisers looking at performance fee structures should take some comfort because there are sophisticated investors pushing the industry in this direction.
“I think it’s going to force more fund groups to consider going down this route. The trickle down effect of that is that performance-fee structures are more prevalent in the industry long term.”
However, Tilney managing director Jason Hollands is more skeptical about the impact the move will have the UK retail funds industry.
“Fund cost structures and practices have long differed between both jurisdictions and investor types, as you might expect,” Hollands said. “In a nutshell, scale brings bargaining power.”
