Fee Structure (Explained with example)
Enceladus Capital Management does not charge initial sales load or annual management fees. We only charge a performance fee of 25% on profit based on a high water mark over an annual hurdle rate of 6%.
- Let’s assume that you invest at $100K and a year later the value increases to $118K. The performance fee would be $3K (profit of ($18K-$6K) x 25%). The net value would be $115K after deducting the performance fee of $3K. This $115K will become the high water mark, as profit is made, and performance fee is taken.
- A year later if the value goes down to $90K. There will be no performance fee since there’s a loss.
- Subsequently, it rises to $110K. Even though the value is higher than initial investment of $100K, there will be no performance fee, since it has not exceeded its high water mark set earlier at $115K.
- Further on, the value rises from $110K to $138K. There is a new profit of $23K. This is computed by taking the new value $138K minus the old high water mark $115K. A performance fee of $4.025K is charged (profit of (23K-6.9K)*25%).
- Now, the new high water mark is $133.975K. This high water mark mechanism demands that we earn an absolute profit for the clients before we are rewarded.