The £865 million British Empire Securities & General Trust has dumped its performance fee, although analysts have noted that this may be moot given the fund’s persistent underperformance.
British Empire had previously afforded its managers, Asset Value Investors, a performance fee of 6% for beating its benchmark, the Morningstar Global Growth index.
This will now be removed, and the annual management charge will be increased from 0.6% to 0.7%.
The trust’s board commented that the changes ‘will result in lower potential total expenses for the company when the previous performance fee structure is taken into account and are consistent with the trend in the closed-ended funds market, following the retail distribution review, to have greater simplicity and transparency in costs’.
Analysts at Numis, however, have observed that while 0.7% is competitive with the typical 0.75% clean charge for open-ended funds, ‘removing the performance fee will not necessarily lower expense ratios in our view’.
This is because British Empire has not paid its manager any performance fee since 2010, and was not on track to pay one this year.
In the calendar year to 31 August, the trust returned 4.9% compared with 13.5% from its benchmark and 17.6% from the MSCI World index.