One-time access fee compared with 2 and 20

A one-time payment is a fixed cost. Its effect on the final balance is largest in year one and shrinks in relative terms every year after.

Annual fees do the opposite. Each year's management fee is charged on a larger base as the account grows, each performance fee removes capital that would otherwise have compounded, and the gap widens for the entire holding period. Over ten years at higher returns the difference runs to several times the original allocation.

A performance fee is economically an option on the client's capital. The manager participates in the upside and does not share the downside, which rewards volatility: a strategy that swings hard can generate fees in good years while losses are borne by the investor.

A management fee rewards gathering assets and retaining them, whether or not the strategy performs, because it is charged on assets rather than on results.

The one-time access payment removes the management-fee incentive to retain assets and the performance-fee incentive to seek upside volatility. It does not remove all incentives. BlackRidge receives an introduction fee directly from the selected strategy provider for introducing the client. BlackRidge does not receive broker compensation. That provider receives compensation from the broker, which may be linked to spreads or trading volume and can create an incentive to trade more. The introduction fee gives BlackRidge a financial interest in the client opening an allocation. Its exact amount and the full commercial terms are confirmed in writing before any payment or deposit. Assess these incentives separately from the one-time access payment and review the broker's trading conditions independently.

At BlackRidge the access fee is 6.7% of the agreed trading level, which is the exposure the strategy is authorised to trade. It is not charged on the capital deposited at the broker.

This matters whenever an allocation is notionally funded. A $100,000 trading level costs $6,700 once, whether it is funded in full or with $25,000 of margin and drawdown allowance. Against the smaller deposit that same fee is 26.8% of what was deposited.

Both figures are true and they describe the same payment. The fee buys access to a given exposure, so measuring it against that exposure is the comparison that matches what a fund charges. Measuring it against the deposit is what determines how much the strategy has to earn before the allocation is ahead, which is the number to satisfy yourself about first.

It is also paid before any return exists. A performance fee costs nothing in a flat year; this costs the same in every year, including the first.

Broker costs still apply in the normal course: spreads, commissions, swaps, financing charges, slippage and any taxes in your jurisdiction.

BlackRidge receives an introduction fee directly from the selected strategy provider for introducing the client. BlackRidge does not receive broker compensation. That provider receives compensation from the broker, which may be linked to spreads or trading volume and can create an incentive to trade more. The introduction fee gives BlackRidge a financial interest in the client opening an allocation. Its exact amount and the full commercial terms are confirmed in writing before any payment or deposit. Assess these incentives separately from the one-time access payment and review the broker's trading conditions independently.

The access payment is not refundable once access has been granted.

Any comparison of this kind assumes the same gross performance on both sides, so that only the fee structure differs. It is arithmetic about costs, not a claim that one manager will outperform another.

A fund with a genuine edge can be worth 2 and 20. The point is that the fee should be compared with what it buys, and it usually is not.