SEC raises performance fee thresholds, impacts investment advisers

March 30, 2026

SEC Raising the Bar for Performance Fees

Brian Hirshberg Mayer Brown Free Writings + Perspectives + Follow Contact LinkedIn Facebook X Send Embed

On March 27, 2026, the Securities and Exchange Commission (“SEC”) announced its intention to adjust the dollar thresholds used under the Investment Advisers Act of 1940 in determining when a registered investment adviser may charge performance‑based fees.  These fees, which tie adviser compensation to investment gains, are generally prohibited except in respect of “qualified clients” who meet certain net worth or assets‑under-management criteria.  The inflation-linked adjustment is intended to keep the thresholds meaningful in today’s markets.

For investment advisers, the change could alter which clients qualify for performance‑based arrangements, potentially prompting a review of existing contracts and client onboarding processes.  Private funds and other pooled investment vehicles may particularly feel the impact of the change because performance fees often form a significant portion of adviser compensation.  Advisers should begin assessing how these updated thresholds might affect client eligibility, contract terms and disclosure obligations.  Even modest increases could shift who qualifies for performance fees, making early planning and proactive compliance measures essential before the formal order is issued.  Read the SEC’s notice.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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