Montana is exploring performance-based fee models

The $16.4bn Montana Board of Investments is considering the introduction of performance-based fees for its active managers, weighing the risks and costs related to paying asset managers on a sliding scale based on how they measure up to their benchmark.

Currently all of the state’s equity managers are paid under a fixed fee schedule, and the state investment board has not definitively decided to change that, according to Montana’s Director of Public Market Investments, Rande Muffick. The state’s investment staff has begun exploring a range of options for different fee structures, and has a “heightened interest” in performance-based fees, Muffick said at the board’s February meeting.

“It isn’t really a change yet, it’s more of a change in mindset than anything,” Muffick told the board. “The idea of performance-based fees doesn’t match as well in some types of portfolios as others , but given what’s going on in the industry and the underperformance, largely, of active managers as a whole, we have a heightened interest in looking at performance-based fees, more so than we have in the past.”

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Published by Money Management Report/Pageant Media.