Williamson: Escrowed performance fees work better than clawbacks due to loss aversion
Sarah Williamson · Sarah Williamson – Focusing Capital on the Long-Term (Capital Allocators, EP.67) · Sep 3, 2018 · at 41:30
Sarah Williamson, CEO of FCLTGlobal, explains how fee structures affect investor psychology and mandate duration.
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“There's a lot of behavioral work that says that something that is escrowed is longer term than something that's a clawback. We have this loss aversion, right? So sometimes people have these fees and there's a clawback if you then underperform. Doesn't really work with our brains very well. So something where you actually don't receive the fee until longer periods of time is clearly very helpful.”
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