News

The Wall Street Journal: Money Manager Westwood Joins Zero-Fee Race

Dallas-based Westwood Holdings Group won’t charge fees for new account unless it beats the market

A Dallas money manager is launching an investment account that won’t charge fees unless it beats the market, joining a broader reduction in the price of investing as firms duel for increasingly cost-conscious clients.

Westwood Holdings Group Inc.’s Zero-Based Sensible Fees accounts will carry no base costs. If the manager outperforms, it stands to keep 20% to 40% of those excess returns. The firm is also rolling out another account that bases its fees on risk-adjusted returns.

Both accounts will invest in large-cap stocks, a part of the market where active managers have struggled to beat their benchmarks, said Philip DeSantis, Westwood’s head of product management. The new fee structure is offered through separately managed accounts, which may only be offered to qualified individual investors.

 

Read the Full Article

 

A performance-based fee generally introduces the following risks: (i) performance-based fee arrangements may cause Westwood to make investments that are more risky or speculative than otherwise; (ii) Westwood may receive increased compensation (compared to a fixed fee) based on unrealized appreciation as well as realized gains on assets in the client’s account, (iii) clients may pay a performance fee even if an account declines in value, and (iv) no compensation or refund is paid if Westwood underperforms the benchmark. Sensible Fees are only available to those investors which are “qualified clients,” as defined in Rule 205-3 of the Investment Advisers Act of 1940.