Patent ID: 7624059

Claim:
A method for improving performance characteristics of an investment, comprising the steps of: managing the investment on behalf of an investor, said managing step being carried out by a manager, said managing step resulting in changes in value of the investment; monitoring performance of the investment by a computer system; calculating a performance fee in the computer system, said performance fee being based at least in part on changes in value of the investment over an accrual calculation period; applying the performance fee calculated in said calculating step to an accrual account, said performance fee being applied for relative positive changes in value of the investment; applying a reverse accrual payment from the accrual account to the investment for relative negative changes in value of the investment over said accrual calculation period so that relative negative changes are offset by the reverse accrual payment to the investor resulting in a transfer of risk from the investor to the manager, said reverse accrual payment being limited to an amount in the accrual account, said reverse accrual payment being executed by the computer system; calculating a compensation for the manager for a predetermined period using a computer system, said compensation being a fractional portion of an amount in the accrual account; paying to the manager the compensation calculated in said calculating said compensation step; carrying forward any remaining balance of the accrual account to provide a cushion for future reverse accrual payments; and periodically repeating said steps of monitoring, calculating said performance fee, applying said performance fee, applying said reverse accrual payment, calculating said compensation, paying, and carrying forward any remaining balance.