Welcome back to the Quattro Capital Blog, where our goal is to help accredited investors make informed, confident decisions built on clarity, education, and transparency.
Today we are exploring a factor that often hides in plain sight during fund evaluations. It is the influence that fees have on fixed income fund performance. Many investors look at the target return and the security behind the fund, but far fewer study the fee structure with the same level of scrutiny. Yet fees can quietly become one of the largest determinants of what you actually keep.
Fixed income investing is built around steadiness. Investors choose these strategies for predictable income, lower volatility, and clearer pathways to capital preservation. Because the return ranges are intentionally conservative, even small fees can meaningfully shift outcomes over time. Understanding this dynamic helps investors compare funds accurately and avoid surprises in net performance.
Fixed income returns usually fall within a defined range. This is part of the appeal. You enter the investment specifically for stability and a known income profile. For that reason, fee drag becomes more visible.
If a fund targets nine percent annually and charges two percent in combined management and administrative fees, the investor nets seven percent. On the surface that difference may feel small, but the gap becomes dramatic when compounded over several years. An investor earning seven percent instead of nine percent over a five year horizon will see a materially different total income outcome.
Fees also influence alignment. In certain fund structures, the manager receives guaranteed fees regardless of performance. The investor takes the risk. The manager receives the revenue stream. This can lead to a misalignment between prudent decision making and predictable compensation. It also means that the investor may experience lower yields than expected simply because the fund structure was designed to pay the manager first.
This is not the experience we want for our investors. Predictable income should remain predictable, and the return should stay where it belongs, which is in the investor’s account.
Fees are not just a line item. In a fixed income fund they are a lever that can quietly reshape your results.
Why our partners do not charge management fees
At Quattro Capital, the partners made a deliberate choice. We do not charge management fees on our fixed income funds. This decision is grounded in stewardship, transparency, alignment, and a belief that our investors should benefit fully from the income their capital generates.
Quattro partners place their own capital in the same positions as investors. This means our earnings are tied entirely to the performance of each underlying asset. There is no guaranteed compensation. There is no built in income stream for the management team.
This approach keeps our priorities clear. Protect the capital. Preserve the yield. Maintain disciplined underwriting. Choose collateral with strong fundamentals. And communicate transparently at every stage of the investment cycle.
Every decision is viewed through a simple lens. Would we place our own money in this position at these exact terms. If the answer is not an immediate yes, we will not move forward.
When you remove management fees, more of every dollar stays where it belongs. In the investor account.
A no fee structure means that the yields produced by the income generating assets flow directly to investors. The returns are not reduced by internal expenses, management charges, or layered administrative costs. This keeps the strategy clean, simple, and predictable.
In a world where many funds charge management fees, servicing fees, and sometimes performance fees, fee free structures are rare. They are also powerful. Fixed income investing works best when every dollar is deployed and every dollar is allowed to earn without internal erosion. That is the structure we built and the structure we believe best serves our investors.
Key Takeaway
The most important question is not what the fund earns before fees. It is what you actually keep after fees.
When a fund manager receives fees regardless of fund performance, incentives can drift. When compensation is tied directly to the success of the portfolio, discipline sharpens. Every decision becomes grounded in stewardship.
This alignment is especially important in fixed income funds, where the foundation of stability comes from conservative loan to value ratios, diversified collateral, strong operator track records, and strict underwriting standards. When the manager shares the same financial experience as the investor, the commitment to risk management becomes even stronger.
Key Takeaway
Alignment is powerful. When investors and managers earn together, discipline and stewardship follow.
Protecting the fund and protecting all investors
Although Quattro does not charge management or performance fees, there is one fee built into the structure. It is the three percent early exit fee for investors who redeem capital before the agreed upon term.
This fee is not designed to create income for the partners. It is designed to protect the stability of the fund and the interests of every investor in the portfolio.
Fixed income funds operate on predictable cycles of deployment, interest collection, and distribution. When one investor exits early, that unexpected liquidity request can disrupt the cycle for everyone else. The early exit fee serves as a stabilizer. It discourages premature withdrawals and prevents short term decisions from diluting long term results.
A helpful picture is to imagine a shared investment pool where all capital is working inside timed, income producing positions. An early exit is like pulling water out of the pool while it is still filling. Without a stabilizing mechanism, other investors could feel the effects. The early exit fee keeps the pool balanced and ensures that the fund continues operating as designed.
In this way, the fee protects the fund rather than enriching the manager. It reinforces fairness, predictability, and the principle that every investor should receive the income profile they joined the fund to achieve.
A fee that protects investors, such as the early exit fee, strengthens the fund rather than reducing returns.
Evaluating fees in a fixed income fund is not just a matter of checking a line item. Fees influence how much of the advertised return reaches your account, how aligned the manager is with your goals, and how clearly you can evaluate the performance of the fund.
Investors can use the following questions to understand the true cost of participation.
Some funds charge annual management fees. Some apply servicing fees. Some add performance fees. Others deduct fees directly from your returns before you ever see the income.
A helpful picture is to imagine a rental property where the property manager is allowed to take their portion before the owner receives any of the rent. If the rent is steady, every fee becomes a larger portion of the owner’s income. Fixed income funds behave the same way. The structure of the fee and not just the size of it shapes your actual yield.
A one percent fee in a ten percent fund reduces investor income by ten percent. A two percent fee reduces it by twenty percent. That reduction compounds over time and becomes significant.
If two investors each place one hundred thousand dollars into separate income funds and one earns nine percent net while the other earns seven percent net, the difference becomes pronounced each year. Over a five year period, the investor earning nine percent will end with roughly twelve thousand dollars more. The only difference was the fee structure.
Alignment is one of the most important factors in any alternative investment. If the fund manager earns a guaranteed fee simply for holding investor capital, incentives may shift away from selecting the strongest assets or underwriting conservatively.
An example of a fee that protects investors is the early exit fee. This type of fee discourages unexpected withdrawals and helps preserve the income cycle for all participants. It safeguards stability without enriching the manager.
Complexity often hides costs. A fee structure that requires multiple explanations or exceptions may obscure the net return the investor receives.
A fixed income fund should be transparent and easy to understand. The investor should be able to explain the fee structure to a spouse or advisor without confusion. If a fee structure is complicated to summarize, the strategy itself may not be as straightforward as it appears.
Fees can influence how a manager behaves. If the primary compensation comes from raising capital rather than generating returns from the underlying assets, the emphasis may shift toward growth instead of stewardship.
In income focused strategies where stability matters, incentive alignment becomes essential.
A structure built for investors
Fees matter. They shape returns, determine alignment, and influence the long term effectiveness of an income strategy. At Quattro, we believe investors deserve a structure that is simple, transparent, and aligned from the first dollar to the last.
Our decision not to charge management or performance fees is more than a feature. It is a commitment to stewardship and an expression of how we believe income investing should work. Investors keep more of what their capital earns. The fund remains focused on performance, not overhead. And our team participates in the exact same experience we ask our investors to join.
If you want to explore how a fee free, asset backed fixed income strategy may support your financial goals, our team is here to help you walk through the details with clarity and confidence.