Hermes to allow clawback of fund fees

Hermes Fund Managers will allow all its investors to claw back performance fees, the group said yesterday, in a move that could herald fundamental change in an industry battling client anger over excessive charges.

The firm -- owned by British Telecom’s pension fund -- will roll out to its entire range the fee structure recently brought in at its hedge fund business as it aims to attract third-party mandates.

“We are not going to receive the performance fee in one lump sum. We receive a third only. Only if we meet or beat benchmark the following year, do we receive the next third and again for the following year,” chief investment officer Saker Nusseibeh said in an interview.

Hermes BPK Partners, its fund of hedge funds shop, said last year that it would split annual performance fees into three chunks, to be held in escrow and paid over three years. If the fund then underperforms in any given year, the instalment due for that period is forfeited, should clients choose to opt for this structure.

The decision to roll that out to the whole firm is a response to intense criticism from investors over performance fees in the wake of the financial crisis.