NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Portfolio Manager
Ms. Iyer, a salaried professional, wants a PMS provider to invest her Rs 60 lakh and asks the adviser about the fee structure. Which fee structure type is described as charging the portfolio manager a share only on returns above a pre-agreed minimum return?
A return-based fee with a hurdle rate charges the manager a share only on returns above the agreed minimum. A fixed fee is independent of performance, while entry or exit loads are not performance-linked.
- AFixed fee
- BReturn-based fee with hurdle rateCorrect
- CFrontend load only
- DExit load only
Explanation
A return-based (performance) fee with a hurdle rate pays the manager only on returns above the pre-agreed minimum. A fixed fee is charged irrespective of performance. Loads are separate charges on entry or exit.
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