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Absolute Insight accused of 'milking' clients with fee hike
Markets
by Emma Dunkley on Jul 20, 2011 at 15:36
Absolute Insight is closing existing share classes in its Credit fund and is opening new classes with double the performance fee.
Although existing shareholders will be unaffected by the change, which is due on 30 September, new investors will be paying the higher performance fee of 20% instead of 10%.
The fund, managed by Insight’s head of credit Alex Veroude, uses a range of credit-related strategies to achieve positive returns over its cash benchmark, while focusing on mitigating downside risk.
Investing on a global basis, the fund uses a full range of physical and derivative instruments relating to credit.
The move to boost performance fees is the latest in a range of charge hikes, including Standard Life Investments, which raised its annual management charges on Harry Nimmo’s UK Smaller Companies fund and the Global Equity Unconstrained fund to 1.6%, up from 1.5%.
City Asset Management’s research director James Calder said this was ‘another shocking example of an asset manager holding loyal clients to ransom’.
He said performance of Absolute Insight’s Credit fund has been nothing short of spectacular, up 83.8% since launch, but in recognising this performance the firm is ‘milking’ clients for more revenue.
He added this has left ‘a very bad taste in his mouth’ although he believes it is becoming much more of a common trend in the industry.
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8 comments so far. Why not have your say?
proofreader
Jul 20, 2011 at 15:53
new investors will be paying the higher performance fee of 20% instead of 20%.
???????
report thisproofreader
Jul 20, 2011 at 15:57
that makes more sense
report thisJames Phillipps (Citywire)
Jul 20, 2011 at 15:59
Sorry about that, amended now.
report thisD.LAING
Jul 20, 2011 at 16:48
where are the customers yachts?
report thisAnonymous 1 needed this 'off the record'
Jul 20, 2011 at 16:57
City Asset Management say "another shocking example of an asset manager holding loyal clients to ransom", ignoring that the hike doesn't apply to existing (loyal) investors.
In the next paragraph they say "performance of Absolute Insight’s Credit fund has been nothing short of spectacular", suggesting that their loyal clients may have done rather well?
What is "nothing short of spectacular" worth? Quite a lot to loyal clients (but I don't want to defend the practice as it could easily end in tears - past performance etc...).
report thisAS
Jul 20, 2011 at 17:00
How can this be "milking" or "holding loyal clients to ransom" when existing clients are unaffected by this change?
And since when is a fee move from 1.5% to 1.6% a "hike"?
This type of sensationalist reporting is really not helpful to anyone...
report thisJames Calder
Jul 20, 2011 at 17:09
As I was the one quoted I feel I have the right of reply. Firstly any client wishing to add to their position will from September have no choice but to purchase the new share classes with the higher fees. Any new clients we take on will again have no choice. A numner of groups when soft closing funds will allow existing investors to remain at the same fee rate (CAM being considered the investor).
Secondly its the performance fee moving 10 to 20% of any outperfoemance over the benchmark and hurdel rate so it is much more than a 0.1% move in fees, it cuts into the return of the client.
Our clients have done well with this fund -- a fund we have purchased since the early days of its existence therefore we feel slgihtly aggrieved that we helped build it up only for the fees to rise.
As for the annoymous poster I wonder who he/she works for?
report thisAnonymous 1 needed this 'off the record'
Jul 20, 2011 at 17:33
As the anonymous poster, I feel I have the right to reply to James Calder.
I work for myself, I don't use their fund, or any with similar performance fees and I have absolutely no vested interests in this. My point is only that you pay your money and take your choice - nothing else.
Vote with your feet if the fees are unjustified.
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