Qbank - Asset Manager Code (Fee)

CFA Level III
#1

(Below extract from EOC)

The disclosures regarding management fees state:

The firm charges a 2% asset-based management fee. In addition to the management fee, clients may pay an incentive fee at the end of each year. The incentive fee is equal to 20% of the account’s net investment income and net realized and unrealized capital gains for the year. No incentive fee will be paid unless the Fund has offset all prior net realized capital losses and net investment losses with realized capital gains, unrealized appreciation, and net investment income from all securities held by the Fund. Q. Are the firm’s disclosures regarding management fees consistent with the required and recommended standards of the Asset Manager Code? A. Yes. B. No, because they do not use plain language. C. No, because they do not include the average or expected expenses or fees clients are likely to incur.

#2

B

#3

C

#4

C

#5

C

#6

A

#7

C is correct. According to the recommendations and guidance of Section F(4d) of the Asset Manager Code, managers must disclose to prospective clients the average or expected expenses or fees clients are likely to incur, and to existing clients the actual fees and other costs charged to them. (EOC)

But I’m curious how to state average or expected expenses or fees in performance fee case…

#8

I guess you have to present scenarios (best base and worst)