Recently, performance-related fees have been the subject of increasing discussion, particularly with regard to specialized portfolios. Under this fee structure, the AIFM, if it achieves certain performance targets, is entitled to an additional fee. Conservation services are provided in different ways. Some executives will enter into agreements with a bank or other part of their own group to ensure custody. A single, separate custodian is appointed for large funds with multiple managers. The Fund must decide which of the functions of the manager or custodian bank will perform on a case-by-case basis and who will be liable if this is not the case. If the fund management contract remains silent on the level of diligence of the manager, the law implies a standard of care. The agreement implies that the AIFM must exercise the standard of competence and diligence of an advisor duly competent in this field. The key elements are that advice must be given carefully and should be reasonable. If agents with a sufficiently large fund try to impose a higher level of care, the manager will often find it difficult to resist. One approach is to ensure that clear and fairly harmless general principles are adopted, which do not require the fund manager to do something that he would not do based on financial criteria If there is a difficult decision, for example, to buy or sell Nike shares, do you want the manager to make the decision for financial reasons and not affect performance? Agents who are forced by members to commit to a particular directive – make sure that:- Increasingly, those who are not in favour of e-mail are called “luddites”. In a world where paper is increasingly fashionable, it is fashionable to give instructions via email.
This is not without risks for both parties. Some leaders insist that the losses be compensated. Before awarding compensation, you should think about how instructions from one (or more agents) are emailed to the manager. It is worth reading the particularly obscure paragraph in the fine print entitled “Indications”. What may work for one fund cannot work for another….