If it is net of free, monthly performance is not easy to compute because quarterly performance fee might or might not be charged for that month. Say for example, Jan +2% gross, and 1.6% net (after 20% charge). So you report 1.6%. Suppose you make -2% gross in Feb, and 0% in Mar. Your actual quarterly performance is negative, and so you should not charge quarterly performance fee. Do you still charge the Jan performance fee, and use Jan as the high water mark? Is this the way IB calculates the performance fee?
All the information is available at the NFA site. You can download the guides. But you will have to read them yourself. For now, you might want to take a look at this sample performance calculator. www.nfa.futures.org/NFA-compliance/NFA-commodity-pool-operators/sample-performance-guide.xls - 2009-06-22
If I understand ChrisM correctly, you will still charge Jan performance fee (1.6%) and use Jan as the high water mark. So you will charge 0% to Feb and Mar. Based on above, you still have to calculate performance fee EACH and EVERY month. But the actual billing submission may be done either monthly or quarterly. I prefer IB can auto-calculate incentive fee MONTHLY (with high water mark) and auto-bill MONTHLY as well. Would you mind to contact IB and ask them to support ¡§Automatic MONTHLY incentive fee (with high water mark) calculation and bill¡¨? I did contact IB for this. If enough people ask for it, IB may implement it in future.
If you want monthly performance fee, you better not use IB autobill. It is a mess. Will ib keep track of high water mark, and will ib give you 1099 (whatever tax form) for your tax filing every year?
It looks like your already use "IB monthly performance fee autobill". I do not aware IB support "monthly performance fee autobill". I though IB only supports "quarterly performance fee autobill". (Calculate fee quarterly and bill quarterly as well. Not sure if they support high water mark for this quarterly.). I think this feature is mainly for RIA or hedge fund. It may not be suitable for CTA which need monthly fee/performance calculation. I am not sure my understanding is correct or not. Did I miss anything here? Thanks for advices.
Regarding accounting (and general CTA questions) - please download CME publication "Guide to Becoming a CTA" (as far as I know you may contact CME to receive this free publication). I have also found this document available in "General Topics" section on this website: http://www.danielstrading.com/resources/education/exchange-publications/cme/ In this publication"Guide..." you will find explained sample of accounting, which should answer your particular questions. BTW - Why this publication is available on mentioned website and not on CME`s is a little mystery to me. About IB autobilling system - it deducts fees automatically on gross profit, including interest and accruals which is not what most CTAs do.
So, what do most CTAs do in management and incentive fees calculations? I am trying to learn more in this area. Thanks.
Very good question. You have manual option in IB`s menu and I believe this is being widely used. As I am not a big fan of anonymous trader`s forums please PM me with any other specific questions.
Yes, I believe IB sends 1099's to all US account owners, even if your account is a sub-account of an advisor's. Best source for info on IB is IB, though. Good trading! Aaron Schindler Schindler Trading