Model Two
The Performance Partnership Model
True alignment of interests — we only earn when your portfolio exceeds the hurdle rate.
Best for qualified investors seeking absolute returns.
This is our alignment-of-interests offering. We do not charge a management fee. We only earn when your account grows.
For qualified clients only
Hurdle rate: 10% annual fixed rate or S&P 500 Total Return Index
High-water mark applies
Eligibility Requirements
Available to Qualified Clients as defined by SEC Rule 205-3:
- • Net worth of at least $2.2 million (excluding primary residence), OR
- • At least $1.1 million in assets under management with our firm
How the Hurdle Rate Works
Client selects one hurdle rate at account opening. Performance fee applies only to gains exceeding the chosen hurdle.
- • 10% Fixed Rate — a flat annual return threshold. Performance fees apply only to gains above this rate.
- • S&P 500 Total Return Index — the hurdle adjusts with the market. Historical average: 10.26% annualized.
Your hurdle rate is locked at account opening and applies for the life of the agreement.
Important Disclosure
Performance-based fee arrangements may create an incentive for greater risk-taking. The hurdle rate and high-water mark provisions are designed to mitigate, but do not eliminate, this potential conflict.
Interactive Tool
High-Water Mark Simulator
Explore how the high-water mark mechanism works. Adjust returns for each year to see when performance fees apply — and when they do not.
High-Water Mark Simulator
Adjust the starting value and year-by-year returns to see how the high-water mark protects you from paying fees on recovered losses.
How the High-Water Mark and Hurdle Rate Protect You
We only charge a performance fee when your portfolio exceeds both the high-water mark AND the chosen hurdle rate (10%). The high-water mark is the highest portfolio value ever achieved. If your portfolio declines, we must first recover all losses before any performance fee applies. Even when the portfolio grows, you pay no fee unless the return exceeds the hurdle rate. You never pay fees on the same dollar of gains twice.
In this scenario, you paid no performance fee in 4 of 5 years because the portfolio did not exceed its high-water mark plus the 10% hurdle rate. In 1 year, the portfolio grew but did not clear the hurdle threshold -- no fee was charged despite positive returns. Your effective fee rate was 5.1% of total gains.
Chart showing portfolio value, high-water mark, and fees charged over 5 years with a 10% hurdle rate. Starting value: $1,000,000. Final value: $1,185,030. Total fees paid: $10,000.
Under a traditional 1.25% AUM fee, the same portfolio would have paid $68,997 in fees over 5 years -- compared to $10,000 under the Performance Partnership.
Hypothetical illustration. Starting value: $1,000,000. Performance fee: 20% on gains exceeding the 10% hurdle rate above the high-water mark.
Ready to explore the Performance Partnership?
Schedule a consultation to discuss your qualifications and determine if this model aligns with your investment goals.