Not a fan of the VGI fee structure. I think you need to be very confident they produce very good before fees performance in order to compensate.
Fees appear less with some of the other names I pointed out in my earlier post. Maybe VGI are simply better managers though?
If I interpret it correct, let's say the MSCI index goes up by 15% in the first year but unfortunately VGI lag and do 10%.
Take off 1.5% base, then almost that again for performance fees (0.15* after fee performance being 8.5%). I think we need to shave off 2.8% total there. Then 50bps maybe in admin costs (not really sure). So you might get 6.7% of that 10% and in a year when they did worse than the equity index. Potentially of course.
At least with many competitors in this scenario the investor may get about 8.5% rather than 6.7%.
The VGI method may work better in large down years? Some other managers may get a performance fee when their fund loses 10% but the index drops 20%.
Interested in other's thoughts. 1.5% is not cheap for a base fee even forgetting about performance fee methods.
