In an era where investors are highly conscious about costs and value for money, the traditional fee structures in funds, such as the fixed annual management fees, raise significant friction.

Investors feel they are overpaying for underperformance or paying high fees which are not reflective of the actual management effort or performance outcomes.

This creates a critical point of tension: how can fund managers justify their fees while ensuring investors see them as fair and equitable? The inability to clearly connect fees with tangible outcomes can lead to dissatisfaction, increased churn, and pressure on fund managers to either reduce fees or enhance returns without clear guidelines.

The primary challenge lies in the complexity of calculating and aligning fees with results that are meaningful to investors, as performance metrics can be diverse and subjective.

There's a lack of standardized tools or frameworks that empower funds to transparently adjust fee structures in direct correspondence with actual investor success.

Current solutions often include performance-based fees but lack transparency and flexibility.

Market standards are still largely biased towards fixed fees regardless of performance, offering little innovation in fee structure adaptation.