Average Excess Return of Incentive Fee Funds

Chart produced by Sasha Franger

Performance incentive fee funds fare worse in quarters that include the economic downturn

The line graph charts the excess return experienced by performance incentive fee funds since December 1999 for quarterly rolling one-year periods. The number of months when performance incentive fee funds outperform funds without performance incentive fees is evenly split. In 23 of the 50 quarters, funds with performance incentive fees outperform their classification average. The most deeply negative time for performance incentive fee funds was 2008 and 2009, which would include fund performance during the height of the downturn. Since then, during the recovery, funds with performance incentives have performed similarly to funds without performance incentives with excess returns bouncing around the zero mark since June 2010. During the last two quarters of 2010 and the first two quarters of 2011 performance incentive fee funds’ performance was better on average than funds without incentive fees; however, they performed worse in the next three quarters. In the final quarter in this chart, performance incentive fee funds performed just slightly worse (0.21%).