COLL 8.6.3 Performance Fees—QFC Retail Schemes

(1) The latest filed prospectus of a QFC retail scheme may permit a payment (a performance fee) for the operator's periodic charges, or to any investment adviser, to be based on a comparison between fluctuations in the value or price of—
(a) 1 or more aspects of the scheme property; and
(b) property of any description, an index or another factor designed for the purpose.

Note Latest filed prospectus and investment adviser are defined in the glossary.
(2) Any performance fee must be consistent with rule 8.6.2 (Payments out of scheme property—QFC retail schemes).
(3) The following provisions apply in deciding whether a performance fee is consistent with rule 8.6.2:
(a) a performance fee must be calculated and paid after all other payments have been considered;
(b) if a performance fee is to be paid on the basis of the performance of the scheme against an index or another factor—the index or other factor must be reasonable given the scheme's investment objectives, strategies and policy, and must be applied consistently;
(c) a performance fee may be based on performance above a defined positive rate of return (the hurdle rate), which may be fixed or variable;
(d) if paragraph (b) or (c) applies—the index or other factor, or hurdle rate, may be carried forward to future accrual periods;
(e) the period over which the index or other factor, or hurdle rate, accrues and the frequency with which it crystallises must be reasonable;
(f) unless allowed by rule 8.6.2 (1), there must be no arrangements to adjust the price or value of issue or redemption transactions in relation to performance fees accrued or paid if the transactions happen within the accrual period of the charge.
Derived from QFCRA RM/2010-05 (as from 1st January 2011)