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Society & Culture2 mins ago
Investment management
2 Answers
How do funds take out management/performance fees once monies have been invested for over a year? They could sell securities, but then they would have to sell every year, which doesn't make much sense. Ans what if no dividends are paid - no income to take as fees.
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Assuming you are talking about an open-ended fund (ie, unit trust, OEIC, SICAV, etc)
You are one of many unit holders in the fund, and although you are not buying or selling units regularly, there is probably money coming in and out of the fund on a frequent basis as others buy and sell units. Managing this constant cashflow is a large part of managing the fund, and there will almost always be a small amount of cash held for this purpose. Management fees would come out of this cash buffer and stocks would be sold if necessary to cover this. To the fund manager, this is just another outflow the same as if someone had sold units.
You are one of many unit holders in the fund, and although you are not buying or selling units regularly, there is probably money coming in and out of the fund on a frequent basis as others buy and sell units. Managing this constant cashflow is a large part of managing the fund, and there will almost always be a small amount of cash held for this purpose. Management fees would come out of this cash buffer and stocks would be sold if necessary to cover this. To the fund manager, this is just another outflow the same as if someone had sold units.
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