Several issuers are exploring the possibility of charging performance fees on active ETFs in what would be a first for the wrapper in Europe.
White-label platform HANetf is in discussions with a handful of clients looking to charge performance fees, while Goldman Sachs ETF Accelerator, a digital platform that helps clients launch, list, and manage their own ETF products, also said the fee structure had been “very topical” in conversations with clients.
Steve Sachs, global chief operating officer of Goldman Sachs ETF Accelerator told ETF Stream: “Performance fees have been very topical in the conversations we are having with clients and is one that will continue to persist."
“From an industry trend perspective, particularly as it relates to active ETFs, we will start to see more performance fees in the future.”
Ossiam, which manages a range of passive and active ETFs, is monitoring the potential use of performance fees, a source familiar with the matter told ETF Stream.
Waystone and JP Morgan Asset Management both declined to comment.
Performance fees, traditionally associated with the hedge fund industry, vary based on the investment return delivered to clients and are generally charged as a percentage of profits over and above a benchmark or absolute level. They are additional to management fees.
Sergio Venti, partner at Deloitte Luxembourg, said: “There is no explicit regulatory prohibition against the use of performance fees in Luxembourg for ETFs. However, performance fees must comply with applicable ESMA guidelines.”
In other words, they must be aligned with investor interests and based on a clear and appropriate benchmark which is calculated consistently and adequately disclosed to investors.
While no ETFs charging performance fees have yet launched in Europe, exchange-traded products (ETPs) using a performance fee structure have received approval.
Kronos Strategy ETP, for example, a Leverage Shares product which listed in 2022 and employs a trend-following strategy seeking to outperform the S&P 500, charges a 20% performance fee subject to a high-water mark.
