Set out the three standard ways a performance-based fee can be structured

The first form is symmetrical, sometimes called a fulcrum fee: the fee rises with outperformance and falls by the same proportion with underperformance around a base level, so manager and client share upside and downside alike. The second is a bonus structure: a base fee plus a share of any positive excess return, with no penalty for underperformance, which creates an option-like payoff and an incentive to raise risk. The third is a bonus with a high-water mark: the bonus is paid only once the manager has recovered earlier shortfalls, so the client does not pay twice for the same gains. Caps, floors and hurdle rates can be added to any of the three to limit extreme outcomes.