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Foreign & Colonial IT ditches its performance fee
by Sarah Miloudi on Mar 07, 2011 at 10:53
The board of the Foreign & Colonial Investment Trust has dropped the vehicle's performance fee.
The £2.1 billion trust, managed by Jeremy Tigue - which initiated the first review of its fees since 2005 last year - has introduced a base management fee of 0.365% per annum of market capitalisation and scrapped its fee payable to the investment manager.
According to analysts at Numis Securities, had the revamped charging structure been introduced last year, the total amount paid in fees would have been £6.05 million, instead of the £6.52 million actually paid.
The trust’s previous fee structure was far more complex, with a fixed fee of £6.8 million and two performance fees, equal to 5% of the net asset value (NAV) outperformance of the benchmark, plus a 0.5% hurdle, and 5% of NAV outperformance of the five closest peers.
A more complicated fee structure was introduced in order to reduce conflicts of interest for the manager given that parts of the portfolio, including Japan, large cap US and private equity, were outsourced to other management groups.
F&C, however, took back responsibility for the Japanese portfolio at last year, triggering the change.
The fee review was revealed in Foreign & Colonial’s results for the year ended 31 December, and began when Simon Fraser succeeded Mark Loveday as the investment trust's chairman.
Over the year under review the investment trust, which trades at a 10.7% discount, returned 15.8%, keeping pace with its benchmark.
Tigue said he is looking to his private equity holdings to boost the vehicle’s performance going forward. ‘Private equity will be a positive contributor again,’ he told Citywire, pointing out that a number of these positions are likely to return cash over the next two years.
Tigue intends to stance by his defensive stance which has held back performance of the fund. He said: ‘The market is going to be a bit more defensive over the next six months. Oil is a big worry at the moment, interest rates are going up and everybody knows the emerging market story,' he said.
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