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NISM Certifications · NISM-Series-XXI-A: Portfolio Management Services (PMS) Distributors · Role of Portfolio Managers

In a PMS, the fee structure under which the manager charges a fee only when the portfolio return exceeds an agreed minimum return is called:

This is a return-based or performance fee with a hurdle rate. The manager earns the fee only on returns above the agreed minimum return. A fixed fee applies regardless of performance, and loads are charged on entry or exit rather than linked to returns.

  1. AFixed fee
  2. BReturn-based (performance) fee with a hurdle rateCorrect
  3. CFrontend load
  4. DExit load

Explanation

A return-based fee is charged on profits, and a hurdle rate is the minimum return that must be earned before the performance fee applies. A fixed fee is charged regardless of performance. Loads are charges on entry or exit and are not performance-linked.

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