HFCM financial advisors provides financial advice and guidance to investors “Typically for compensation”. This includes a number of services such as investment management advice, tax planning advice, and estate planning advice.
Here is how much investors should expect to pay to HFCM.
HFCM provides professional initial advice for free in order to allow investors to evaluate and decide on their initial investment goals. Never the less investors can sometimes expect to pay a fee for special detailed investment advice that would require special research and analyses, such fees will be determined by the advisors based on each project time, needs and requirements
Brokers dealers offering a wide range of securities products through where the actual investment takes place have different types of fees, these fees are variable per product, such fees include: Pricing Spreads, Trading Commissions, Roll over Swaps and currency exchange fees.
What are Asset Managers Management Fees? Management fees are fees paid to HFCM professionals entrusted with managing your investments on your behalf. Typically determined as a percentage of the total assets under management (AUM), administration fees and performance fees to cover a variety of expenses, including portfolio management, and administrative costs. Management fees are present in almost all investment management, but the actual rate can vary significantly. Like any other service fee, management fees are paid to investment professionals in return for their services. The services can be in the form of advice, expertise, and, optimistically, a high return on your investment. Understanding Management Fees In the investment management industry, management fees are the norm among all types of investment opportunities. In exchange for paying management fees, investors are provided with access to the expertise and resources of investment professionals. The professionals can help investors with allocating risk, rebalancing portfolios, or providing personalized investment advice. Management fees can also cover expenses involved with managing a portfolio, such as fund operations and administrative costs. The management fee varies but usually ranges anywhere from 0.20% to 2.00%, depending on factors such as management style and size of the investment. Investment firms that are more passive with their investments generally charge a lower fee relative to those that manage their investments more actively. Also, institutional investors or high-net-worth individuals with large sums of money to invest are sometimes eligible to receive a lower management fee. Management fees can also be referred to as investment fees or advisory fees. Typical management fees are taken as a percentage of the total assets under management (AUM). The amount is quoted annually and usually applied on a monthly or quarterly basis. For example, if you’ve invested $10,000 with an annual management fee of 2.00%, you would expect to pay a fee of $200 per year. If management fees are applied every quarter, you would expect to pay a fee of $50 every three months.
What is a Performance Fee?
A performance fee is a payment made to an investment manager for generating positive returns. A performance fee can be calculated many ways. Most common is as a percentage of investment profits, both realized and unrealized. It is largely a feature of the hedge fund industry, where performance fees have made many hedge fund managers among the wealthiest people in the world.
Understanding Performance FeesThe basic rationale for performance fees is that they align the interests of fund managers and their investors, and are an incentive for fund managers to generate positive returns.
Example of a Performance FeeImagine an investor takes a $10 million position with a hedge fund and after a year the net asset value (NAV) has increased by 10% (or $1 million) making that position worth $11 million. The manager will have earned 20% of that $1 million change, or $200,000. That fee reduces the NAV to $10.8 million which equals an 8% return independent of any other fees. The highest value of a fund over a given period is known as a high-water mark. If the fund falls from that high, generally a performance fee isn't incurred. Managers tend to charge a fee only when they surpass the high-water mark.
What Is a High-Water Mark?A high-water mark is the highest peak in value that an investment fund or account has reached. This term is often used in the context of fund manager compensation, which is performance-based. The high-water mark ensures the manager does not get paid large sums for poor performance. If the manager loses money over a period, he must get the fund above the high-water mark before receiving a performance bonus from the assets under management (AUM).
Understanding High-Water MarkA high-water mark ensures that investors do not have to pay performance fees for poor performance, but, more importantly, guarantees that investors do not pay performance-based fees twice for the same amount of performance.
High-Water Mark ExampleFor example, assume an investor is invested in a hedge fund that charges a 20% performance fee, which is quite typical in the industry. Assume the investor places $500,000 into the fund, and, during its first month, the fund earns a 15% return. Thus, the investor's original investment is worth $575,000. The investor owes a 20% fee on this $75,000 gain, which equates to $15,000. At this point, the high-water mark for this particular investor is $575,000, and the investor is obligated to pay $15,000 to the portfolio manager. Next, assume the fund loses 20% in the next month. The investor's account drops to a value of $460,000. This is where the importance of the high-water mark is noted. A performance fee does not have to be paid on any gains from $460,000 to $575,000, only after the high-water mark amount. Assume that in the third month the fund unexpectedly earns a profit of 50%. In this unlikely case, the value of the investor's account rises from $460,000 to $690,000. Without a high-water mark in place, the investor owes the original $15,000 fee, plus 20% on the gain from $460,000 to $690,000, which equates to 20% on a gain of $230,000, or an additional $46,000 in performance fees.
Value of a High-Water MarkThe high-water mark prevents this "double fee" from occurring. With a high-water mark in place, all gains from $460,000 to $575,000 are disregarded, but gains above the high-water mark are subject to the performance-based fee. In this example, beyond the original $15,000 performance-based fee, this investor owes 20% on the gains from $575,000 to $690,000, which is an additional $23,000. In total, with a high-water mark in place, the investor owes $38,000 in performance fees, which is $690,000 less than the original investment of $500,000 multiplied by 20%. Without a high-water mark in place, which is below industry standards, the investor owes a 20% performance fee on all gains, which equates to $61,000. The value of a high-water mark is unquestionable. A high-water mark both protects the fund's investors from double fees and motivates the fund's managers to perform well, in order to earn fees.
Redemption fees are charges that apply to investment funds when investors decide to liquidate their investments, portfolio positions in the market and the redemption fees will normally increase if investors request redemption of their investment earlier than the investment portfolio term. Because HFCM portfolios are designed primarily to help long-term investors