Jack Porter and Melissa Smith are co-managers for the Circue Library Foundation (Circue) in Canada. Within the next six months, Porter and Smith will be replacing one of Circue’s underperforming active managers. This choice will rely on the terms of investment management contracts—specifically, liquidity and management fee structure. Circue’s IPS indicates some tolerance for lower liquidity, a moderate sensitivity to management fees, and a heightened sensitivity to closet indexing.
Circue is considering the following three investment vehicles with distinct fee structures:
Hedge funds with a soft lock
Open-end funds with an incentive fee
Closed-end funds with no incentive fee
为什么说 An incentive fee is applicable in this case as mutual fund assets are often “sticky”; investors are reluctant to switch allocations once made and may accept lower returns. ？
