What We Charge - Vision Capital Fund's Fees
Rationale: While building Vision Capital Fund, we thought deeply about its fees.
We wanted a fair fee structure that could do four things:
1) keep costs as low as possible for our investors
2) lower the fees for our investors as the fund’s assets under management (AUM) grow
3) earn performance fees on the excess returns only if the fund produces a decent return, and
4) to be able to survive the occasional tough markets and avoid unnecessary stress allowing us to do this for a long time, for decades.
Management Fee
The management fee is a fixed percentage of AUM that gradually declines as the fund's AUM increases. It is accrued monthly but paid quarterly. This is intentional to not incentivize us to gather AUM, as size is the enemy of returns. We do have significant operating leverage with respect to certain fixed costs of operating the investment fund, and we want to share that scaled economics back with our investors whenever we can.
Performance Fee
The performance fee is 15% of the excess returns over a 6% compounded hurdle rate, subject to a high watermark, and charged annually. Whenever an investor invests in Vision Capital Fund, a 6% compounded hurdle line is drawn. The value of Vision Capital Fund has to exceed the line in order for performance fees to be earned. In addition, performance fees are also subject to a high watermark, and is only eligible when it exceeds the prior highest value. This protects our investors from paying fees for poor performance, and ensures that they don't pay the same performance fee twice.
If and when the Vision Capital Fund's AUM exceeds USD 300 million, we will endeavour to lower our investors' fees further as and when opportunities arise.
Early Withdrawal Penalty
There are no subscription or redemption fees other than an early withdrawal penalty: 3% in the first year, 2% in the second year, and 1% in the third year. We are implementing this primarily to guide good long-term investing behaviour. As an investor in Vision Capital Fund, we want you to stay invested for the long run because that gives you the best chance to earn good returns.
Ultimate Goal
By not charging exorbitant fees and gradually lowering our fees over time as we grow, we aim for Vision Capital Fund to become a long-term investment vehicle to grow yours and our wealth together well on net returns after fees basis.