MAGDA WIERZYCKA: Allan Gray is not selling fridges, so why offer a refund?
Offshore Orbis funds plan to increase their performance fee to 25%, and no equalisation reserve can remedy that
The past week brought the news that Allan Gray’s offshore Orbis funds, which have disappointed many investors over the recent past, are planning to increase their performance fee basis from 12% to 25%. That is, in the event that they beat the index they will keep 25% of that outperformance.
Be careful not to be sucked in by talk of an equalisation reserve that is meant to refund fees in the event of underperformance. Who really cares about a partial refund when your investment has underperformed? A refund works if you are selling a faulty car or fridge. It doesn’t work when you are selling someone a future, where not delivering has life-long implications...
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