Shaughnessy warns retail investors on performance fees

Retail investors should avoid funds which carry a performance fee as they are more suitable for institutional investors, Fidelity's Gary Shaughnessy has argued.

The managing director of Fidelity Worldwide Investment said the extra money performance fees can generate for managers means they may be tempted to lock in outperformance and reduce risk at the wrong time. This is to ensure they meet a benchmark return which guarantees them a payout. Speaking to Investment Week, Shaughnessy said: “I do have a concern about performance fees in the open retail market. They can create the wrong sort of incentives. For example, you can end up in a situation where a manager is ahead of a benchmark and then takes risk off the table to keep themselves ahead, in...