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Utilico halves fees...until performance improves

by Robert St George on Feb 21, 2014 at 10:33

Utilico halves fees...until performance improves

The £387 million Utilico Investments trust has slashed its management fee until its lacklustre performance turns.

The fee paid to its adviser, Ingot Capital Management, has been cut from 0.5% of gross assets to 0.25% until the fund’s net asset value (NAV) passes 284.81p. The current NAV is 148.29p. With the trust trading at 107.3 pence, it represents a 27.7% discount to NAV.

Utilico claimed that over the full year the reduction would result in savings worth £600,000.

Over the past three years Utilico, which invests in both its highly performing sister fund Utilico Emerging Markets and directly in listed firms, has lost 24% in share price terms and seen a 23.3% fall in NAV.

Ewan Lovett-Turner, an analyst at Numis Securities, argued that the lower fee may not be enough to impress investors.

‘In theory, the fund’s unconstrained global mandate is appealing. However, the fund has a concentrated portfolio of illiquid holdings and has substantial gearing through the zero dividend preference shares (ZDPs),’ he said. These ZDPs mean that Utilico is 166% geared.

Excluding the debt from the trust’s assets, Lovett-Turner noted that the management fee was still equivalent to 0.7% of shareholders’ funds. Utilico’s ongoing charges ratio is 1.7%.

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