According to the trust’s prospectus, published on Tuesday the trust will forego the customary annual management charge in favour of a 15% performance fee.
The fee will only apply to returns over the cumulative per annum target rate threshold of 10% – referred to as the “hurdle”.
To calculate the performance fee the trust will take into account two different NAV per ordinary share figures – the ‘adjusted’, and the ‘high watermark’.
The ‘adjusted’ NAV per share is determined by taking the NAV per share on the final business day of the performance period – the company’s financial year – and adding on any performance fee that was accumulated during said period.
The ‘high watermark’ NAV per share is the NAV per share on the last business day of the most recent period in which a performance fee was earned, to which the effect of that performance fee is added back. Alternatively, if a performance fee is yet to be earned, the share issue price is added in its stead.
Subtracting either the ‘high watermark’ NAV per share or the ‘hurdle’ figure – whichever is greater – from the ‘adjusted’ NAV per share, that amount is multiplied by the time-weighted average number of shares available since the previous period.
The total is then multiplied by 15%, with the resulting figure given as the performance fee, 80% of which will be paid in shares and the remainder in cash.
In the event of the ‘adjusted’ NAV per share minus the ‘high watermark’ NAV per share yielding a negative total it will be taken as zero.
A total of 200 million shares will be issued at a value of £1 per share, and there will also be an ongoing charge ratio, which Woodford Investment Management estimates to be no higher than 0.35%, assuming it hits the £200m issue target.
Managed by Neil Woodford, the trust will compile a portfolio of blue-chip stocks alongside early-stage and early-growth companies, totalling 50-100 holdings, with a minimum of 40 to be held once fully invested.
The trust’s target portfolio breakdown reads as 25% invested in mid and large-cap stocks, 25% in early-growth and 50% in early-stage companies.
Mark Dampier, head of investment research at Hargreaves Lansdown, said: “The launch of this relatively small and niche trust would pass most people by if it weren’t for Woodford being at the helm.
“Everything Woodford does continues to attract high levels of investor interest and this latest launch is no exception.”
