CMFAS RES5 Financial Planning & Calculations question: performance fee charged by a fund

CMFAS RES5Financial Planning & Calculations

Under MAS requirements, a performance fee charged by a fund must:

A Be calculated before all other fees and payments are deducted, and crystallise at least quarterly
B Be equitable to all participants, calculated after all other payments, and crystallise at most once a year
C Be structured only as a fixed 20% share of gross profits, payable whenever the fund beats its benchmark
D Be equitable to all participants, calculated after all other payments, and crystallise at least once a month

Show the answer and explanation

Answer: B. Be equitable to all participants, calculated after all other payments, and crystallise at most once a year

MAS rules require a performance fee to be equitable to all participants, calculated after all other payments, to crystallise no more frequently than once a year, and to be structured as either a fulcrum fee or a high water mark arrangement.

Common mistake

The fee is calculated after (not before) other payments, and crystallises at most once a year — more frequent crystallisation is not permitted.

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Original study material mapped to the public CMFAS RES5 syllabus. Unofficial, not endorsed by MAS or SCI. Verify figures and rules against current guidance before relying on them.