A spokesman for the industry regulator, the Financial Services Authority spoke last week at an investment management conference where the topic of performance related fees was raised.
In the past, the FSA has shied away from letting fund managers make charges based on how well their funds perform. At the conference, Kevin Tomlin, head of collective investment schemes at the FSA said "There is a greater argument for introducing performance fees than ever before. We believe changes to issues like this are important to the industry and investors".
Allowing fund managers to introduce performance related fees could be bad news as well as good. Everyone wants low charges so that the majority of the profit made is retained. At the moment there is a set charge, known when the investment is taken out, regardless of performance. However, if charges increased with better performance, this would wipe out at least some of the profit.
The question for the fund managers will be whether or not the charges are reduced for bad performance? In today's financial climate, a lot of investments have fallen in value but the charges are still the same.
Will they be allowed to have their cake and eat it?