Fulcrum Fee

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Fulcrum Fee

A fee than an investment adviser may charge a client if the return on a portfolio exceeds some agreed-upon benchmark. A fulcrum fee is one the few performance-based fees than an investment adviser may assess; one cannot charge it to small investors, only to institutional investors and high net-worth individuals.
References in periodicals archive ?
When should fulcrum fees (1) be preferred over flat fees or other performance fee structures?
Fulcrum fees are centered on a base fee that is adjusted up or down based on performance relative to a clearly defined benchmark.
With fulcrum fees, a manager who outperforms the hurdle variable receives a proportion of the positive differential, while they suffer a symmetrical deduction from the management fee in the case of underperformance.
Since then, only a handful of US managers have been brave enough to adopt fulcrum fees.
The policy provides specific guidance to investment managers and staff regarding the preferred structure of fulcrum fees (fees centered on a target, or "fulcrum," performance level, which are increased or decreased for better or worse performance) and performance fees (additional, performance-based fees paid when an investment manager achieves an investment return that beats a specified benchmark).