What is a performance fee?

An extra fee charged when a fund beats a defined hurdle - commonly 15% to 20% of the outperformance, and in some wholesale funds materially more.

Three terms in the disclosure tell you how investor-friendly it is:

• The hurdle - what must be beaten before any fee is charged
• The high-water mark - whether past losses must be recovered before the fee is charged again
• The crystallisation frequency - how often it is calculated and paid

A performance fee with no high-water mark can be charged twice on the same recovered ground.