Westwood Holdings Group, an investment manager for institutional investors, private wealth clients and financial intermediaries, has launched Westwood Sensible Fees, a new ‘simple fee structure’.
Detailed in Westwood’s latest whitepaper: ‘Mission [Possible]: Changing the Probability of Winning for Active Investors’, Sensible Fees combines a zero or passive-like base fee plus a linear fee directly linked to risk-adjusted outperformance only when it is earned. Sensible fees are offered using two different options, both integrating built-in guardrails designed to deliver the majority of value-added returns back to investors by negating unnecessary or uncompensated risk-taking in pursuit of performance fees.
“We believe Westwood’s Zero-Based Sensible Fees are an efficient way to eliminate beta fees altogether and align manager compensation with outperformance only when a favourable outcome is achieved,” says Phil DeSantis, CFA, SVP, Head of Product Management at Westwood. “Westwood’s IR Sensible Fees are an industry first and take scrutiny to the highest level while aligning fees with the value-added return over the benchmark as well as active risk.”
“Fees in efficient asset classes should reflect the market rate for beta at a low cost, while aligning active fees to solve for the probability of outperformance and favourable outcomes.”
This new, innovative approach will be offered initially in conjunction with Westwood’s “best ideas” high-conviction LargeCap Select strategy, which is built on a 35-year-old investment process and maintains a five- year track record. By combining a high active share strategy, with a proven track record and Sensible Fees structure, we aim to change the probability of winning in the US Large Cap asset class. Sensible Fees will initially be offered to institutional investors via separately managed accounts and eligible retail investors via SMAs.
Steve Paddon, SVP, Head of Distribution, says: “The industry is primed for a major disruptor like Sensible Fees – a fee structure that will better reflect the valued-added returns of active management by creating better fee symmetry in an efficient asset class that can serve as a catalyst for investors and, in turn, radically change manager selection and asset allocation decisions.”