Allianz Global Investors is set to put the skills of its fund managers to the test by rolling out a new charging model that relies on their ability to beat the benchmark.
The firm is set to launch three strategies – US equity, US fixed income and managed futures – into the US market in December.
Wealth Manager can reveal the fee structure will be brought to the UK retail market early next year.
Investors in the AllianzGI PerformanceFee Structured US Fixed Income fund, AllianzGI PerformanceFee Structured US Equity fund, and AllianzGI PerformanceFee Managed Futures Strategy fund, will pay two fees.
On the equity fund, Allianz GI said the fund will not charge a management fee at all if it matches or lags the S&P 500.
Operating expenses for the fund range from 0 to 10 basis points depending on the share class.
There will also be a 5 basis point fee to cover costs of buying ETFs. Allianz GI will earn a management fee of as much as 120 bps if the fund outperforms the S&P 500 by 250 bps.
The firm said that for each of the funds in the US a base management fee and performance target versus a performance hurdle is stated.
The performance test will be based on a rolling twelve month test of net performance based on share class NAV versus the performance hurdle.
After testing the twelve month performance, a fee adjustment will be made based on a stated ratio of fund performance to an increase (decrease) in the management fee up to a maximum (minimum) fee adjustment.
The fee adjustment will then be applied to the average net assets of the fund over the twelve month period.
Allianz GI declined to disclose how the performance fee will be calculated in the UK at this stage.
It is understood that the structure may be slightly different to the new funds launched in the US.
In the UK, the firm will offer the new performance fee pricing alongside the traditional charging structure on some of its existing retail funds by creating a new share class.
An Allianz GI spokesperson said: ‘We are introducing an innovative, new performance-based fee model that aligns our pricing with the value we generate for our clients as an active asset manager.
‘From early next year, we will launch additional share classes in a selection of our UK retail funds that will give clients the opportunity to only pay an active fund fee for delivered outperformance.’
Only one other active asset manager is known to offer a similar charging structure.
AllianceBernstein launched six funds – five equity funds and one bond fund – in March this year, called the ‘AB Performance Fee series’.
Fees in this series are kept at 5bps for the equity funds and 10bps for the bond fund, but for every basis point of outperformance above their benchmarks, the funds will charge a performance fee of half a basis point.
The funds have maximum fees of 105bps, but two of the funds – the emerging markets growth fund and international bond fund – have maximum fees of 145bps and 70bps, respectively.