Performance Fee

A performance fee is a share of profit paid to whoever manages an account or supplies the trades — a money manager under a PAMM or MAM structure, a strategy provider on a copy-trading platform, or an allocator in a funded-account arrangement. It is charged on gains rather than on assets, which aligns the manager with the investor only as far as the structure's details allow. Three of those details decide what the fee really costs. Whether it is measured against a high-water mark, so that losses have to be recovered before the manager charges again; how often it crystallises, because a fee taken monthly on a volatile equity curve can be charged repeatedly on ground that was won and lost more than once; and whether it applies to gross profit or to profit after spreads, commissions and swap. A performance fee on gross results is charged on money the account never had.