The management commission is the one charged by the administrator of an investment fund to make the money of its client grow.
With this collection, the fund management company seeks to reward its analysts, those professionals who specialize in designing strategies to make capital profitable in the financial markets.
In addition, with the income obtained by the management commission, the managing company will be able to cover various operating expenses. These are, for example, the payment of rent and the basic services of their offices.
Management commission characteristics
Among the characteristics of the management commission are:
- It is one of the main fees charged by a fund manager.
- It is different from commissions or custody expenses, which are those imposed exclusively for keeping the assets of a person (natural or legal) stored.
- The management fee is usually calculated for each day that the company has managed the fund. This differs, for example, from the subscription commission, which is a single payment that does not depend on the period of the client's stay.
- For the reasons explained above, if the investor has a long-term horizon, he will look for the management commission to be as low as possible. This is because the charge will be higher if you stay longer in the fund.
- It is deducted directly from the money deposited in the investment fund, that is, it does not require an additional outlay from the client.
- It can be set as a percentage of the invested capital, of the results, or a combination of both variables. If the latter is the case, incentives are created for the manager to generate profits for its clients. However, the fund manager will prefer the first or third modality to ensure a minimum income.
Management commission in Spain
The management commission in Spain obeys annual limits, depending on the category to which it belongs. There are three options:
- If it is calculated only on the invested equity, the maximum is 2.25% for Securities Investment Funds (FIM) and 1% for Money Market Assets Investment Funds (FIAMM).
- If it depends only on the profitability obtained by the manager, the limit is 18% in the FIM and 10% in the FIAMM. In this case, it is also known as the success commission.
- If the calculation is mixed, the maximums are 1.35% of the investor's capital plus 9% of the results, if we refer to the FIM. Likewise, a ceiling of 0.67% of equity plus 3.33% of the profits achieved is established for FIAMMs.
It should be explained that FIMs are those funds that invest almost entirely in financial assets ( fixed income and variable income ) that are listed on the stock market. Meanwhile, FIAMMs place their capital exclusively in low-risk and highly liquid instruments such as Treasury Bills. .
Management fee example
Let's look at an example of a management fee. Let's suppose that Juan López invests US $ 5,000 in an FIM in Spain. The charge will only be on the invested capital and is equal to the maximum taxable amount, that is, 1%.
Then, the commission that the investor will pay will be US $ 50 per year. This amount is not charged from one moment to the next, but a small daily amount is deducted from the managed capital until a charge of US $ 50 is accumulated at the end of the twelve months.