A fund with 6% fees?

NO MANAGEMENT COST: INVESTORS PAY HANDSOMELY FOR PERFORMANCE

- Hilton Tarrant

ADJUSTABLE. In periods of underperformance, the fund's fee could be negative.

(Moneyweb)

The listing of the Allan Gray-Orbis Global Balanced Feeder Fund on the JSE as an actively managed ETF (AMETF) this week has drawn sharp attention to its fee structure.

It has handily outperformed the benchmark, with a return over the past year (to end October) of 28.8% in rand terms (31% in US dollars). This compares to the benchmark, which is up 12.7% in rand over the same period.

The total expense ratio charged for this over a one-year basis is 6.17%.

Add in transaction costs, which include value-added tax (VAT), and this increases to 6.26%.

The bulk of this comprises performance fees of 5%. The base fee charged is 1.1% per year.

Allan Gray does not charge a management fee in the feeder fund, which invests solely into the $5.9 billion (about R100 billion) Orbis SICAV Global Balanced Fund.

It is paid a marketing and distribution fee by Orbis.

It said: "Orbis charges a unique refundable performance-based fee in Orbis Global Balanced, which is designed to align Orbis' interest with investor outcomes.

"The fee consists of a base fee and a refundable performance fee. In traditional fee structures, the total fee is paid to the manager immediately.