This Unique Mutual Fund Charges Less Than An Index Fund If It Underperforms: (FFLYX)

Ted

FYI: (This is a follow-up article.)

Fund manager AlllianceBernstein has started what the average investor might hope for: A flexible set of fees for funds in which the company receives only a nominal annual fee unless a fund outperforms a benchmark index.
Regards,
Ted
https://www.marketwatch.com/story/this-unique-mutual-fund-charges-less-than-an-index-fund-if-it-underperforms-2018-04-05/print

M* Snapshot FFLYX:
http://www.morningstar.com/funds/XNAS/FFLYX/quote.html

msf

I see AB's PR division has gone into overdrive.

"Unique" because they have fulcrum fees? Fidelity has been doing this with many of its funds for a long time. "Several prominent managers have selectively used fulcrum fees: Putnam, Vanguard, Janus, and most recently AllianceBernstein (AB)".
https://www.bbh.com/en-us/insights/are-fulcrum-fees-the-future--24868

"According to Frank Caruso, chief investment officer of U.S. Growth Equities at AllianceBernstein, the FlexFee funds have the “lowest possible” minimum levels."

Not close. There is no lowest possible, since fees can go negative. From M*, 2011:

Bridgeway Pays Shareholders to Invest, for Now Bridgeway Aggressive Investors 1 BRAGX is expected to have a negative 0.51% expense ratio according the most recent prospectus. Meanwhile, Bridgeway Micro-Cap Limited BRMCX is expected to have a 0.00% expense ratio.

The negative and zero expense ratios are possible because Houston-based Bridgeway levies a performance fee on top of its management fee. The funds have performed so poorly relative to their benchmark indexes that the fund's manager, instead of its shareholders, has to put money into the fund or waive its management fee to compensate shareholders until performance improves.

Mark

@msf - what don't you understand about alternative facts?