City of London Investment Trust, one of the oldest and largest generalist investment trusts, said this week it would remove its performance fee and charge only a management fee, prompting analysts to predict that more would follow
August 10, 2013 Leave a comment
August 2, 2013 6:31 pm
Trust performance fees axed
By Jonathan Eley
City of London Investment Trust, one of the oldest and largest generalist investment trusts, said this week it would remove its performance fee and charge only a management fee, prompting analysts to predict that more would follow. Henderson, which manages the trust, said it hoped the move would make it “more attractive to a wider audience of retail investors.” The annual management fee will henceforth by 0.365 per cent and the ongoing charges in respect for this year should be around 0.45 per cent – less than some tracker funds.Performance fees tend to be more common among investment trusts than among open-ended funds. They are meant to align the interests of managers with those of investors, but critics say they are too complicated and reward managers for doing what they should be doing anyway.
Julian Bartlett, chairman of the investment management group at Grant Thornton, said that a long period of meagre returns meant that many performance fees were not delivering for managers. “If you’re an investment trust board looking to keep your trust competitive, removing a performance fee that’s never been activated, or is underwater, is an obvious place to start.”
City of London is the sixth investment trust to abolish a performance fee so far this year, according to the Association of Investment Companies. Harry Nimmo’s Standard Life UK Smaller Companies trust axed its performance fee in 2012 and the Foreign and Colonial Investment Trust, the world’s oldest, did likewise in 2011.
The majority of trusts (62 per cent) still have some kind of performance fee, according to the AIC.
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