Also known as: Success Fee, Profit Share, Incentive Fee, Carried Interest
A Performance Fee is a percentage of the net new profit a money manager or copy-trading master generates for an investor, charged only when the account reaches a new equity peak. It is the incentive layer of managed-account compensation and is almost always paired with a high-water mark so investors never pay twice on the same recovered gains.
The high-water mark is the highest account value reached to date. The fee applies only to profit above that mark. If an account rises from $10,000 to $12,000, the manager charges the fee on the $2,000 gain and the mark resets to $12,000. If it then falls to $11,000 and recovers to $12,000, no fee is charged on that recovery — the investor already paid on that ground.
Typical performance fees in retail managed accounts run 20–30% of new profit. On a $1,000 profit at a 30% fee, $300 goes to the manager and $700 stays with the investor. When an IB has a 50/50 split with the manager, that $300 fee is divided so the IB earns $150 on top of any standard broker rebate.
Because the fee only triggers on genuine new profit, it aligns the manager's pay with investor outcomes — but it also means an IB relying on performance-fee splits earns nothing in flat or losing periods, unlike volume rebates.
The managed-account platform tracks each investor's equity and their personal high-water mark. At the end of each fee period (daily, monthly, or per rollover), it measures the account against that mark. If the account set a new peak, the platform calculates the fee on the profit above the old mark and debits it automatically.
The mark then resets to the new peak. In any period where the account is below its prior peak, no performance fee accrues, so the manager must first recover the drawdown before earning again. Where an IB has a fee-sharing agreement, the platform or the manager splits the collected fee by the agreed ratio.
Management fees, when present, are charged separately on assets under management regardless of performance, so the two fee types do not offset each other.
The account's starting equity becomes the initial high-water mark for each investor.
At each fee interval the platform compares current equity to the investor's high-water mark.
If a new peak is reached, the fee is applied to the profit above the old mark; otherwise nothing is charged.
The high-water mark moves up to the new equity peak so future fees only apply to further gains.
Under a fee-sharing agreement, the collected performance fee is divided between manager and IB at the agreed ratio.
Why it matters for partnership: Negotiating a split of the manager's performance fee can out-earn broker rebates alone, especially for a manager who trades low volume but achieves high profitability, giving the IB a second, results-linked income stream.
A PAMM manager on a B2Broker-powered platform charges a 30% performance fee with a high-water mark. An investor earns $1,000 in new profit, so $300 is deducted. The referring IB holds a 50/50 fee-split agreement, so the IB receives $150 from that fee in addition to the volume rebate the broker pays on the pool's lots.
| Attribute | Performance fee | Management fee |
|---|---|---|
| Charged on | New profit above HWM | Total assets under management |
| Triggers when | Account sets a new peak | Every period, regardless of result |
| Investor pays in a loss | No | Yes |
| Aligns with returns | Strongly | Weakly |
For high-net-worth clients, negotiate a slightly reduced performance fee with the manager to close the deal — a smaller split of a larger deposit often nets more than a full split of nothing.
Promoting a manager who charges a performance fee without a high-water mark means clients can pay repeatedly on the same recovered equity, eroding trust and inviting complaints.
It is the highest value an account has reached. Performance fees apply only to profit above this peak, so investors do not pay fees again on equity they merely recovered after a loss.
In retail managed accounts it is commonly 20–30% of new profit. The exact figure is set by the manager and disclosed before an investor commits.
No. With a high-water mark, no performance fee is charged in a period where the account is below its prior peak. The manager must recover the drawdown first.
No. A management fee is charged on assets under management regardless of results, while a performance fee is charged only on new profit above the high-water mark.
Through a written fee-sharing agreement with the manager that assigns the IB a percentage of the collected performance fee, separate from broker volume rebates.
Often yes, especially for larger deposits. Managers may lower the rate to win a sizeable client, which can benefit both the IB and the investor.
A practical checklist for money managers evaluating brokers for PAMM and MAM partnerships: track-record rules, fee structures, allocation methods, and the safeguards that protect both you …