7.7 Trailing Fees

This topic explains about Trailing Fees.

A trailing fee is defined as the commission or incentive that is paid, normally by the fund, to unit holders, brokers, agents, agency branches, account officer or IFA for the continued loyalty of the unit holders to the fund. Here the term loyalty refers to the fact that unit holders who are allocated units hold them for a certain minimum period of time, which in turn results in the fund manager being able to project cash flows and investments with a greater degree of accuracy.

The fee is calculated based on the holdings of the investor, using any of the following methods:

• Quarterly Average Holding
• Average Holdings
• Average Units
• Latest Balance

A minimum period can also be set, for which the balances must be held, before a trailing fee can be applied.

FCIS provides the facility to compute trailer commission at any level i.e. Agent, Agency Branch, Account officer or IFA. The commission sharing will be applicable below the level at which trailer commission is computed.

For instance, if trailer commission is computed at Agency branch level, commission sharing on flat percentage will be applicable to all levels below agency branch.