Parplus Fund Has No Management Fees

January 7, 2020 James Heinsman Company Spotlight

James Carney, founder of Parplus Partners, says his fund will never take a management fee. He will, instead, charge his clients a performance fee when and if his funds surpass the S&P 500 stock index.

“Eat what you kill. That’s what I’ve been doing for 34 years,” said Carney, who is also the fund’s CEO.

Parplus was founded in 2017, but only began to accept outside money last summer. The firm manages about $500 million worth of assets, so if it had indeed charged the average management fee of 1.27 percent last year it would have made about $6.4 million on that fee alone.

The firm runs a volatility strategy which strives to protect investors during downturns in the market. Carney was previously a proprietary trader who led Royal Bank of Canada’s volatility team. He explains that he is sure that his model will be successful. He says the huge size of the opportunity in volatility trading will almost guarantee success, especially since banks have mostly left this niche during the past ten years.

Carney said that as a proprietary trader he was only paid based on the profits he made. He does not see any reason why hedge fund managers should have such a different model.

It is true that the company will not get paid anything if they equal of fall short of the S&P 500’s performance, but when Parplus does succeed, their performance fees are much higher than those of the average hedge fund, taking about one-third of the profits off the top, compared to the average performance fee of 15 percent.

management fees, S&P 500,

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