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Baillie Gifford rises to RDR challenge with fee cuts on four trusts
by Sarah Miloudi on Mar 15, 2013 at 07:31
The board of Japanese smaller companies trust Baillie Gifford Shin Nippon has decided to reduce the £82.9 million fund's annual management fee.
The change will take effect from 1 April when the management fee will drop from a flat rate of 1% of net assets to a rate of 0.95% on the first £50 million of net assets and 0.65% on the remainder.
Fees are often a sticking point for investors in smaller company funds, and last year Standard Life Investments cut the cost of Harry Nimmo's UK Smaller Companies Trust, bringing the charge closer into line with his open-end fund of the same name and making it more competitively priced in the post-retail distribution review (RDR) world.
Moreover, despite strong performance, a number of smaller company funds have deeply embedded discounts, though Baillie Gifford's Shin Nippon has managed to break this trend.
Over three years to the end of December its share price has risen 74.56%, and its shares trade at a 5.9% premium to net asset value (NAV).
Over the same stretch the vehicle ranks top of its sector, having delivered to investors NAV growth of 60.5%.
James Budden, director of retail marketing and distribution at Baillie Gifford, said the trust's fees were cut because the firm wants to remain competitive following the RDR, which in the open-end universe has prompted a number of firms to introduce cheaper 'clean' share classes.
He said that unlike trusts such as Scottish Mortgage - where manager James Anderson has recently gone on sabbatical - trusts focused on companies at the smaller end of the spectrum face additional pressures.
Coinciding with the change in Shin Nippon, the boards of the Baillie-Gifford managed Edinburgh Worldwide, the Baillie Gifford Japan Trust and Pacific Horizon Investment Trust will also get a fees makeover.
Budden said: 'Scottish Mortgage Investment Trust, with total assets of £2.6 billion, has an ongoing charge of just 0.51%, but for smaller investment trusts the environment has now become very challenging in pricing terms.
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