Question 05
Why should you trust us?
Check our incentives. Our bottom line is directly tied to the value we deliver for you.
We refund fees and offer fee structures with no base fee i.e., clients only pay us when we outperform. Asset management has a “heads I win, tails you lose” problem. Managers do extraordinarily well when they perform and really well when they don’t. They never really feel the pain.
We go to great lengths to make sure that our interests are aligned with our clients’. When we outperform, fees go into a reserve held for you, and when we underperform, refunds come back out of it to you. This ensures that our success is directly tied to yours. You'll struggle to find another structure quite like it.
Asset managers should earn their fees, not simply collect them.
“Heads I win, tails you lose.” Who in their right mind would take that bet? And yet it's still the industry default. The odds have been stacked in managers’ favour most of the time, with fee structures that pay out regardless of the outcome for clients.
We reject this idea. Call us crazy, but we believe asset managers should earn their fees, not simply collect a toll. All of our strategies offer fee structures that have a performance component, and for almost 25 years we’ve offered a refundable performance fee. For clients who opt for that fee structure this is how it works. When we outperform, a performance fee is set aside in a reserve. When we underperform, we refund fees back out of that reserve. Upside and downside, shared. It's an unusual arrangement, and it concentrates the mind wonderfully. It ensures that our interests are aligned as our success is directly tied to the outcomes we deliver for clients.
Alignment should leave evidence
Clients also behave differently, in exactly the way you'd expect. The hardest moment for any long-term investor is the bottom of a long period of underperformance, when the urge to sell is strongest and the cost of selling is highest. A client whose reserve is paying refunds through that period has a reason to stay that goes beyond willpower, and fee refunds cushion the blow of underperformance. The evidence: in 2008, with global markets down 35% and no gates or lockups holding anyone in, we saw net redemptions of less than 10%—albeit across different funds and fee structures than those in place today. Our clients held their nerve partly because they knew we were also feeling the pain. That was enough to get them to stay invested over the tough times. That’s what it means to be in it together.
“Heads I win, tails you lose.” Who in their right mind would take that bet? And yet it's still the industry default. The odds have been stacked in managers’ favour most of the time, with fee structures that pay out regardless of the outcome for clients.
Asset managers should earn their fees, not simply collect them.
We reject this idea. Call us crazy, but we believe asset managers should earn their fees, not simply collect a toll. All of our strategies offer fee structures that have a performance component, and for almost 25 years we’ve offered a refundable performance fee. For clients who opt for that fee structure this is how it works. When we outperform, a performance fee is set aside in a reserve. When we underperform, we refund fees back out of that reserve. Upside and downside, shared. It's an unusual arrangement, and it concentrates the mind wonderfully. It ensures that our interests are aligned as our success is directly tied to the outcomes we deliver for clients.
Alignment should leave evidence
Clients also behave differently, in exactly the way you'd expect. The hardest moment for any long-term investor is the bottom of a long period of underperformance, when the urge to sell is strongest and the cost of selling is highest. A client whose reserve is paying refunds through that period has a reason to stay that goes beyond willpower, and fee refunds cushion the blow of underperformance. The evidence: in 2008, with global markets down 35% and no gates or lockups holding anyone in, we saw net redemptions of less than 10%—albeit across different funds and fee structures than those in place today. Our clients held their nerve partly because they knew we were also feeling the pain. That was enough to get them to stay invested over the tough times. That’s what it means to be in it together.
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