Bard Consulting

Fees & Quantitative Analysis

Case Studies & Other Resources


Fees & Quantitative Analysis


Making Sense of Before- and After-Fee Rates of Return

by Dean Altshuler, PhD, CFA Institute Magazine, July 2016

If time-weighted rates of return tests are factored into an incentive fee calculation, then large overpayments are likely when using the industry-favored approach for accruing incentive fees. Altshuler explains how to properly account for manager fees when using a time-weighted rate of return and notes that if incentive fees are based upon time-weighted returns, manager overpayments are possible.

One Way Not to Align Interests

by Roy Schneiderman, Institutional Real Estate Americas, December 2015

Why are investments often evaluated on a time-weighted return basis when incentive-fee structures are based on IRRs? Schneiderman explains the ins and outs of why time-weighted returns are not a good metric for incentive-fee structures.

Time-Weights for No One: Investors' Focus Should be on Current Income, Not Unrealized Gains

by Roy Schneiderman, Institutional Real Estate Letter, July/August 2015

As life expectancy increases and job growth slows, pension funds require more cash flow. Increased focus on benchmarking and time-weighted returns has favored appreciation in real estate investments, but given real estate’s capacity for generating cash flow, cash flow should be an objective of all real estate allocations.

Introducing Aggregate Return on Investment as a Solution to the Contradiction Between Some PME Metrics and IRR

by Dean Altshuler, PhD, and Carlo Alberto Magni, PhD, The Journal of Performance Measurement, Fall 2015

Explaining why the Index Comparison Method is illegitimate, Altshuler and Magni present the benefits of Aggregate Return on Investment, a metric which uses one consistent time series of Net Asset Values, preserves additivity, and does not incur the problem of multiple solutions.

The Importance of Testing Term Sheet Math

PrivcapRE Report / Performance & Portfolio interviews Roy Schneiderman, 2015.

Schneiderman points out that problems between general and limited partners often occur at the point where term sheets are converted to legal documents. He recommends paying close attention to language and testing by third-party analysts when converting term sheets into legal documents.

It's a Fee for All: Rethinking Incentives and Alignment of Interest

by Faye Beverett and Roy Schneiderman, The Advisor's Guide to Commercial Real Estate, April 2014

Since the market has not produced fee structures that align investor and investment manager interests as closely as they should be, Schneiderman explains the benefits and drawbacks of asset management and incentive fees as currently used and ponders some new ideas to better align investor and investment manager goals. 

Chapter 16: Trends in Real Estate Compensation 

by Roy Schneiderman & Amy Wells, Private Equity International’s Private Equity Compensation and Incentives, April 2012

In this chapter, Schneiderman and Wells review current manager and general partner compensation trends for various investment strategies and vehicles in the real estate equity arena with regard to private equity deal structures in general, and manager compensation in particular.

Why IRR is NOT the Rate of Return for Your Investment: Introducing AIRR to the Real Estate Community

by Dean Altshuler, PhD, and Carlo Alberto Magni, PhD, Journal of Real Estate Portfolio Management, 2012

After explaining why IRRs often do not produce an accurate rate of return, Altshuler and Magni introduce a new metric called Average IRR (AIRR) that produces a correct money-weighted rate of return. AIRR has none of the problems that the IRR has, and it appropriately accounts for the amounts actually invested over the course of the investment.

Chapter 5: A New Approach to Interim Incentive Fee Payments

by Roy Schneiderman and Dean Altshuler, PhD, Real Estate Compensation and Incentives: How Executives, Investors and Investment Managers Negotiate and Secure the Best Terms, 2012

One of the most important and heavily negotiated elements of manager compensation has been, and will continue to be, the incentive fee or “promote.” In this chapter, Schneiderman and Altshuler explore whether a general partner or manager should receive incentive fee payments prior to the full realization of an investment program, and if so, how such interim incentive payment(s) should be structured.

Overpayment of Manager Incentive Fees: When Preferred Returns and IRR Hurdles Differ

by Roy Schneiderman and Dean Altshuler PhD, Journal of Real Estate Portfolio Management, May/August 2011

While many investors do not see a significant difference in fees associated with the change from Preferred Return formulations to IRR Hurdle formulations, Schneiderman and Altshuler shed light on situations where these two formulations yield significantly different results for investors and managers.