TARAZ: escrow settlement of performance fees

The classic problem with performance fees is that the manager takes the booked profit — and if losses follow, the fee does not come back. TARAZ fixes that asymmetry.

How it works

1. The performance fee is computed only on profit above the previous high-water mark.
2. Part of it is held in escrow until the profit proves durable.
3. If the manager crosses the committed rules, clawback from the escrow stays possible.

Who should care

The investor who wants the manager’s incentives aligned with their own — and the manager who wants to show that alignment as a competitive edge.

See the TARAZ page and the TARAZ guide, and read No fees on losses.

Frequently asked questions

Does TARAZ apply to every account? TARAZ is the settlement module; it covers accounts offered under this structure, which is visible on the account page.

How long is the escrow part held? The escrow holding period is defined in each account’s terms; no single standard is promised for all.

Is TARAZ the same as HWM? HWM is the rule for computing chargeable profit; TARAZ is the whole escrow settlement structure, of which HWM is one part.

How is an escrowed fee different from an ordinary fee? With an ordinary fee, the computed profit is paid out at that moment; under TARAZ a portion stays with the platform until the profit proves durable. The practical difference: in the next period, if the account falls and the earlier profit did not hold, the escrowed part is recovered per that account’s rules.

Next step

Read the next article in this category for the clawback logic on breach; the full structure is on the TARAZ page.

The three TARAZ mechanisms

• Fee only on profit above the high-water mark
• Part of the fee in escrow until profit proves durable
• Clawback on a breach of the committed rules
• These three keep the manager aligned with you
• Details are in each account’s terms

The full escrow-settlement structure: See it.