Provider Fee with Performance - Pay Gap
Provider Fee with Performance - Pay Gap
18 Oct 2023, 10:09
Hello ,
I have read the explanations you give about pay with performance to providers.
Even in the examples you mention there is a serious gap.
Question/Topic : If the broker draws the provider fee from the investor's account, then the "high water level" should be reduced. (In the examples you say it stays constant.)
Explanation / Example : Investor with 10,000 won 2,000 by copying provider. Now it has a capital of 12,000. At the end of the month, the broker deducts from his account a 30% performance fee for the provider ( 2,000 * 30% = 600 ). Then, the "High Water Level" should be : 12,000 - 600 = 11,400 ( NOT 12,000 ).
If the investor pays the provider from another source that does not affect the account, then only the "High Water Level" can remain at 12,000.
In case the broker deducts the 600 fee from the account, the "High Water Level" should be 12,000 - 600 = 11,400. Otherwise (if it is at 12,000), the provider will generate NEW profits (height 600) up to 12,000 to reach the "High Water Level" and for these profits will never be paid. In essence, in this case, each time the provider generates and returns to the investor the fee received. The investor, as long as the provider is profitable with his strategy and the broker draws the fees from his account, will never pay with his own money. After each "High Water" , continuously the provider will return the payment received back to the investor with the profits of his strategy.
This "High Water Level" method is mainly used in investment portfolios and mutual funds. In these cases the investor pays from a different source and not from his portfolio.
The simple and fair thing is: every month the NEW POSITIVES are paid. If there is a loss instead of a profit, then NEW profits = e.g. -1000. Then the provider should first cover the -1000 which is the current loss after the last payment received and take profits only if it has moved to a new positive balance of new profits.
Conclusion: when the provider's fee is deducted from the investment account, then the "High Water Level" should be reduced by the amount deducted from the account.
Example: 10000 became 12,000 (profit 2000).
1. initial "High Water Level" = initial capital 10000.
2. profit 2000 and new capital = 12,000
3. new "High Water Level" = 12,000
4. a) provider payment 2,000 * 30% = 600
b) If the payment was made from an independent source and the account
investor remained at 12,000, then: new "High Level
Water" = 12,000 and new capital = 12,000
c) If the payment was made from the account that is made d
copy of the investor, then:
new "High Water Level" = 12,000 - 600 = 11,400 and new
capital = 11,400 also.
Can you tell me exactly how you act in relation to the above cases?
Thank you for your time.
Replies
Phider
19 Oct 2023, 08:02
( Updated at: 19 Oct 2023, 11:18 )
RE: Provider Fee with Performance - Pay Gap
PanagiotisChar said:
Hi there,
Are you asking how it is working or do you just state that you disagree with the way it works. Because it seems that you have understood how it works and you just disagree.
I don't know English well. I read them from a translation. If I understood correctly please confirm.
If I understood correctly, then yes, I disagree.
Thank you very much.
@Phider
PanagiotisChar
20 Oct 2023, 05:26
( Updated at: 20 Oct 2023, 05:35 )
Hi Phider,
It works as you have described it. If you would like to suggest a change, you can do it in the Suggestions section
@PanagiotisChar
PanagiotisChar
19 Oct 2023, 06:16 ( Updated at: 19 Oct 2023, 06:18 )
Hi there,
Are you asking how it is working or do you just state that you disagree with the way it works. Because it seems that you have understood how it works and you just disagree.
@PanagiotisChar