The fund group is introducing a variable management fee for the Fidelity Special Situations, Fidelity European, Fidelity Asian Dividend, Fidelity Global Special Situations and Fidelity American funds.

The new structure will see a reduction in the annual management charge from 0.75% to 0.65%. An additional charge will then be added depending on how the fund performs relative to its benchmark on an annualised three-year rolling period, after all fees and charges.

It could charge as much as 0.2% above the annual management charge if the fund performs but the price could fall by as much as 0.2% for underperformance, meaning the maximum and minimum fee levied would be 0.85% and 0.45% respectively.

Paras Anand, CIO, equities, Europe at Fidelity, said: “The new structure clearly aligns Fidelity’s interests to that of our clients and, unlike other performance fees out there, we will give back during periods of relative underperformance. It demonstrates our ongoing commitment to providing the best possible value to our clients and we hope it will incentivise them to stay invested in active strategies over the long-term.”

‘Why would you pay for underperformance?’

Reaction to the new fee structure has been mixed.

Darius McDermott, managing director of platform Fund Calibre, said: “It’s a nice idea – the fact that investors will be charged less if funds underperform and more if they do well – but it does make it more complex and confusing for retail investors.

“At the end of the day, we all want good performance at a reasonable price. If this way of pricing means we’ll be charged less if a fund manager has a bad year, then that’s a good outcome.”

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Investors choosing active funds, including ourselves, expect outperformance from the fixed percentage fees they already pay. The reality is no-one wants to invest in an underperforming active fund, no matter how cheap it is.

“To that end, investors will naturally question why they should pay 0.45% for underperformance, when they can pick up an index tracker for as little as 0.06%. They will also question why they should pay more for outperformance, when that is what they expect as standard from an active fund manager.”

Fidelity will roll-out the new fee structure across other funds next month.