SEC's performance fee proposal for ETFs, mutual funds raises questions about expanding investor access

The Securities and Exchange Commission has proposed allowing investment advisers to certain registered funds to charge performance-based compensation, according to the original report. Performance fees, which reward managers for returns above a benchmark or hurdle, have historically been concentrated in hedge funds and private equity vehicles that are open mainly to accredited or qualified investors. Extending them to registered products such as ETFs and mutual funds would bring those fee structures into vehicles available to retail investors.

The proposals would also ease restrictions on interval funds, a category of registered closed-end fund that periodically offers to repurchase a portion of its shares. Together, the changes could widen the range of alternative-style strategies available through familiar, daily-liquidity or periodically liquid wrappers. The report frames the proposal as a question of investor access, and the source material available for this summary does not detail the comment process, implementation timeline, or specific fee limits.


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