28 November 2016 By Jessica Amir
A boutique fund manager is calling upon all investment managers in Australia to move toward a ‘fair' fee model, so they align their interests with their clients.
Co-founder of Harvest Lane Asset Management, Luke Cummings, started an investment fund in 2013 that did not charge management fees, and only relied on performance fees.
"We feel most fund managers don't have their interest aligned with their underlying investors," he said.
Most fund managers charged ‘hefty fees' that exceed the cost of administering the fund, to cover their rent, salaries and insurance etc., with the remainder going to profit and bottom line, Cummings said.
"While that's great for the fund managers, it's not for the investor, particular when returns are low."
Harvest Lane covered all expenses themselves, instead of charging the investor through management fees, he said.
"While it's essentially unheard of in the industry for us to be remunerated based solely on performance, we can't think of a better way to show our investors that our interests are aligned with theirs," Cummings said.
"The only way we get paid is if we perform."
Investors only paid for external fees, which included, administration fees and custody fees.
Notwithstanding that, Harvest Lane operated an absolute return fund, which aimed to produce positive returns in all markets, (10 per cent per annum), regardless of what the stock market was doing.