WW Sensible Fees™ with IR risk-adjusted performance fees implement a simple framework that aims to provide the asset owner an asymmetric advantage in both the short and long term. The pure-zero or low-index-like fee is determined based on the size of the mandate or platform relationship. For example, on average, for investment mandates greater than $100M, the annual base fee for beta would be set at 5 basis points.
The performance fee calculation, based solely on IR, is then calculated annually in arrears over either a trailing one-year or three-year period at the discretion of the asset owner. WW IR Sensible Fees™ also have built-in maximum annualized fee caps to limit manager compensation, but since a high IR is so difficult to achieve, only an outsized performance experience with limited tracking risk would ever approach the cap. It’s important to reiterate that in any mathematical scenario where the IR is positive, the investor will hold the asymmetric advantage as the performance component of the total fee will always be less than or equal to 30% of the excess returns generated.