For a mutual fund company, Steadyhand takes an unconventional approach by offering low-cost funds, co-investing along with clients, hiring portfolio managers who make concentrated bets on their “best ideas”, behaving like part-owners of businesses and promising to close its funds to new investors when the fund gets too large. Steadyhand offers actively-managed funds but they are doing their best to tilt the odds of beating the market in their favour.
I find Steadyhand’s fee structure to be innovative due to a fee reduction program. Steadyhand already has low fees for the five active funds in its lineup — the MERs are 0.36% to 1.32% cheaper than the category average. The fund company then reduces its already low fees (remember we are talking about active funds here) based on the size of a client’s assets with the firm and their tenure with Steadyhand. For example, a client who has a total of between $100,000 and $250,000 invested with Steadyhand receives a 20% discount on their fees. Clients who invest more than $500,000 with Steadyhand receive a whopping 40% discount on fees.
In addition, Steadyhand is promising another discount based on a client’s tenure with the firm. Clients who stick with Steadyhand for 5 years receive a 7% discount and those with 10 years or more with the company receive a 14% discount. Tom Bradley, the company’s President explained that he came up with the idea of a discount based on tenure based on his observation that companies tend to treat their most loyal customers rather poorly. For instance, magazines offer substantial discounts for new customers but those loyal customers, who have been subscribing for years, decades even, pay the list price while renewing. The fee reductions are made in the form of special distributions of additional fund units.
Note: Michael James, Larry MacDonald and I had lunch with Steadyhand’s Tom Bradley and New Guy (that’s the title according to the company website) David Toyne the other day. As I’ve mentioned before there is never a quid pro quo involved. I wrote this post because I found Steadyhand’s fee structure interesting.
