Shinhan Asset Management Launches Industry's First Performance-Linked Fund

Management fees set from 0.0% up to a maximum of 0.90% based on performance
Designed as an online-only fund to minimize costs

Shinhan Asset Management is launching two funds: the ‘Shinhan Early Bird Performance-Linked Fee Fund’ and the ‘Shinhan Small and Mid-Cap Alpha Performance-Linked Fee Fund.’ These are the industry’s first performance-linked products.

Performance-linked funds measure fund management performance against a benchmark on a quarterly or semi-annual basis, and the management company receives fees proportional to the performance. Fees can be set up to 0.90% (0.88% for the Small and Mid-Cap Alpha Fund) depending on performance, or the management company may receive no fees at all. Unlike traditional funds that charge a certain level of fees even when performance is poor, this structure strengthens the management company’s responsibility. When performance exceeds expectations, the management company earns slightly higher fees than usual funds.

The basic management fees, set lower than those of general funds, are also attractive. The Shinhan Early Bird Performance-Linked Fee Fund and the Shinhan Small and Mid-Cap Alpha Performance-Linked Fee Fund charge management fees of 0.45% and 0.44%, respectively, which are about 60% of typical equity funds, until one year after inception. After one year, fees are set between 0% and 0.90% (0.88% for the Small and Mid-Cap Alpha Fund) depending on performance. Additionally, Shinhan Asset Management designed these two products as online-only funds to minimize investment costs for cost-conscious investors.

The two performance-linked funds launched this time are flagship products confidently recommended by Shinhan Asset Management based on proven long-term performance. The Early Bird Fund employs a strategy of identifying leading stocks through proactive research, while the Small and Mid-Cap Alpha Fund adopts a paradigm investment strategy that invests by distinguishing industries leading growth cycles. Both boast top-tier industry performance. Over the past five years and since inception, the Early Bird Fund achieved returns of 28.85% and 287.92%, outperforming the market by 28.13 percentage points and 189.03 percentage points, respectively. The Small and Mid-Cap Alpha Fund posted returns of 43.68% and 153.74%, outperforming the market by 41.43 percentage points and 131.90 percentage points, respectively.

Kim Kyung-il, Head of WM Pension Channel at Shinhan Asset Management, said, “As consensus forms that the recent interest rate hikes are nearing completion, market interest in the stock market is increasing. Especially in 2023, when various macro variables are expected to affect the market in complex ways, the strategies of these two funds, which select investment targets through individual company analysis, are effective. As the industry’s first performance-linked funds, we will also make every effort to manage performance going forward.”