Account Types and Fee Structure
All Managed Account products employ the High Water Mark structure (HWM), which is in our view the fairest structure available between money managers and their investors. Different fee structures are quite often available for different products and participation levels.
Our Managed Account Products are typically geared towards 4 different categories of investors and audiences, each with different goals, and expectations in mind. While this is often unique to every individual, our aim is to produce products that cater to a wide range of clients (or which can be customized to as such). The participants that fall under these categories are certainly not all the same, however, generally speaking in the industry the following attributes characteristically apply to the following groups of investors;
|RETAIL||New to investing. Small amount of risk capital to speculate with.||New||To speculate, hedge, learn, and obtain aggressive profit targets.|
|ECP (PROFESSIONAL)||Usually familiar/experienced with alternative markets. Have a larger portfolio in which to allocate funds with.||Moderate||Diversification, exposure, moderate profit targets, and to maximize capital maintenance over profit maximization.|
|INSTITUTIONAL||A person or organization that invest in large quantities or dollar amounts. Institutional investors face fewer regulations because it is assumed that they are more knowledgeable and better able to understand alternative markets.||Moderate - Experienced||To diversify, gain exposure, and reduce overall portfolio volatility by targeting low risk, stable and consistant gains.|
|PROFESSIONAL FUNDS||An investment vehicle that is made up of a pool of funds collected from many investors for the sole purpose of investing in various different markets.||Experienced||To invest the Fund's capital and attempt to produce capital gains and income for the fund's investors, as per the investment objectives stated in it's prospectus.|
Below is a listing of the various fees per group. This is a general guideline, and it may vary from one product to another, as each program is separate and has its own unique specifications. All fees and charges are clearly indicated however during the sign-up process for each Managed Fund. Generally speaking, unless otherwise advised the schedule of fees are as follows;
SCHEDULE OF PERFORMANCE FEES AND MANAGEMENT FEES
Generally speaking our fees range between 30-35%. This varies per program and based on the brokerage house they are trading at. All fees are listed on the LPOAs which clients sign when participating with a specific fund.
MFH profit shares with their brokers on an increased transactional fee either in the form of a round turn dollar or per million cost or alternatively on a spread markup. Average spread markups vary per program and per brokerage and range from 0 – 2 pips. Performance figures reported on the site are gross performances before any performance fees but net/after and transactional fees. These fees may vary from brokerage to brokerage so please contact us for a recommendation on selecting the best brokerage.
What is a HWM calculation? This is a common approach to the calculation of incentive fees (performance fees). It means that incentive fees are paid only on NET new rises in asset value. If a temporary decline occurs, it must be recouped before new incentive fees are paid. This ensures that investment managers receive a performance fee ONLY when they are profitable in a given month.
There are generally two different types of High Water Marks recognized and employed by different asset managers. The NAV HWM (typically used by mutual funds who charge MGMT fees), and the CB HWM (Claw Back – typically used in the managed futures space by traders who do not charge management fees). An example of the CB High Water Mark protocol in which we employ is as follows:
1.) When a Client deposits their initial funds, that becomes the first High Water Mark (HWM). In this example the Client deposits $100,000 USD.
2.) After 1 month the Trader/Advisor produces 10% in gross profit which brings the Client account up to a gross value of $110,000 USD.
3.) $110,000 USD in equity, minus the last HWM ($100,000 USD) = $10,000 USD in new profit.
4.) In this example the Performance Fee is 30%. So 30% of $10,000 USD new profit is $3,000 USD Performance Fee (PF) which is payable to the Trader/Advisor.
5.) After paying $3,000 USD PF to the Trader/Advisor, the Client retains $7,000 USD of the profit. His account balance after paying the Performance Fee is $107,000 USD, which is then reset as the new High Water Mark for the following month..