Fee Structuring

Fee Structuring

KINTO has a vested interest in its clients’ success. And in asset management this means making clients’ assets grow without unnecessary risks and trading costs which might harm the contributed capital. Thus, our incentives are aligned with clients’ goals.

Fees for managing investment funds in Ukraine are state-regulated. Regulation differs for management of venture-capital funds and other funds. In both cases, asset managers are entitled to base management fee that is charged irrespective of the portfolio performance and an incentive fee (bonus).

Fee for managing non-venture-capital funds

Non-venture-capital fund managers charge a fee calculated as percentage of net asset value of the portfolio under management. This portion of his remuneration is limited to 5% of NAV.

To link the manager’s consideration to the fund’s performance, an incentive fee can be charged. The incentive fee is limited to 15% of the excess of the gain over the hurdle rate, which, by law, is currently established at the National Bank of Ukraine discount rate.

Legitimate expenses of the fund paid from the fund’s assets, other than manager’s fee, may not exceed 5 % of average annual net asset value of the fund during the fiscal year. Examples of such expenses include fees due to the custodian, the registrar, the auditor, and the appraiser of property, broker/dealers, and other operational expenses.

Fee for managing venture-capital funds

Remuneration to the asset management company of the venture-capital fund is comprised of two parts:

• a percentage of the nominal value of the actually placed investment certificates (limit: remuneration cannot exceed 5% of annual average nominal value of certificates in circulation);
• a percentage of the difference between the revenues from sale of the fund's assets and the costs of purchase thereof (limit: remuneration cannot exceed 5% of such differencere).

Bonus (performance fee)

In addition to the (base) management fee, the management company may be entitled to a bonus  payment. This is limited to the 15% of the fund's annual return above the legally established "pre-planned profitability benchmark"). Today (fall of 2003), this benchmark equals the discount rate set by the National Bank of Ukraine.

KINTO, when setting up unit funds or negotiating fees for managing corporate funds, may use different combinations of the base management and performance fees depending of the asset mix, strategies employed, value of the assets under management, term of the agreement, etc.