Outperformance Fee

Outperformance fees are conditional charges applied when a fund outperforms a specified index or a trigger threshold. These fees are added to the annual management fees.

To understand, let's take the example of a fund whose benchmark index is the CAC 40 with reinvested dividends. In 2013, this index increased by 22%. In the same year, the performance of our fund was 26%. It outperformed its index by 4%. The fund's regulations anticipated this possibility by specifying that 25% of the outperformance would go to the management company (and therefore 75% of the outperformance would remain with the fund and thus with the investors). For the 4% outperformance, this represents a 1% commission that rewards the quality of management.