Aim Management Group is asking shareholders to approve performance-based fees on two of its mutual funds.
Levying such fees on its Mid-Cap Opportunities and Small-Cap Opportunities portfolios would let the Houston-based fund company reward managers for stellar returns and pay them less for subpar performance.
Both funds have bolder investment strategies than Aim's other 54 retail portfolios, a spokesman said. Performance fees, which are based on criteria set by the fund company, are a way to keep a tight rein on risk, the spokesman added.
Pinning down precisely how many funds use performance fees is difficult. For example, Morningstar Inc. of Chicago said 97 of the 5,425 long-term mutual funds that it tracks impose such fees, and Value Line Inc. of New York said 219 of the 10,121 long- and short-term funds it tracks charge performance fees. By any measure, however, they are not common. Nonetheless, Geoffrey Bobroff, a mutual fund consultant in East Greenwich, R.I., said they have become less taboo in recent years because the Securities and Exchange Commission has changed rules that had made charging the fees prohibitive.
Fidelity Investments of Boston imposes performance fees on 34 of its 285 funds, and Seattle-based Accessor Capital Management, which is 25% owned by Zions Bancorp, charges such fees on seven of its eight funds.
The fee for Aim's Small-Cap Opportunities Fund would be partly tied to the Russell 2000 index, which the fund tracks. The base fee would be 1%; the maximum it could charge would be 1.75%; and the minimum 0.25%, the spokesman said.
The fund returned 81.83% for the 11 months that ended Oct. 31, while the index netted 14.88%, according to Morningstar.
The performance fee of the Mid-Cap Opportunities Fund would be a base of 1.5% and be tied partly to the S&P Midcap 400 index. The maximum fee would be 2.5%; the minimum 0.5%.
The fund returned 80.2% for the first 10 months of the year, Aim said, and the S&P Midcap 400 index returned 2.8%, according to Morningstar.
Aim manages $106.6 billion of assets.