I have noticed CTAs taking one of two different routes:
- A slimmed down program with management fees only or low incentive fees (for example, Altis has just launched a 1% management fee only, "Pure Trend" program, or Cantab's "Core Macro" program offered at 1/2 & 10)
- Incentive fee only programs (for example, Dunn has charged 0 & 25 for a long time, QIM is offering 0 & 30 via Kettera Strategies Hydra Platform).
The rationale offered for incentive fees in general is the notion that the client is paying for what they want the most: performance. It puts the client and the trader on the same side. Offering an incentive fee only structure takes this argument to its logical extreme: the client only pays for performance. But is this really true?