It all comes down to fees.
By Patrick Cairns, Citywire
13 Jan 2021 10:01
Image: Moneyweb
When tax-free savings accounts (TFSAs) were introduced in South Africa in 2015, the National Treasury ruled that no performance fees could be applied.
Most notably, this affected South Africaâs largest unit trust.
The Allan Gray Balanced fund has always charged a performance fee. In order to make it available to investors in a TFSA, Allan Gray was therefore required to launch a separate fund â the Allan Gray Tax-Free Balanced fund â which charges a flat management fee.
Performance fee philosophy
The argument in favour of performance fees is that they align the interests of the fund manager and clients. If the fund does well, both the manager and the client are rewarded. If it does poorly, they share the pain.