Shareholders in Rockwood Realisation are being called to a general meeting on 25 April to vote on plans that would reverse the investment trust’s wind-up.
The directors have unanimously recommended shareholders support the proposal. A minimum of 50% must back the resolution for it to pass.
Take advantage of inefficiencies in UK small cap market
The £40.6m trust, formerly known as Gresham House Strategic, was at the centre of what could be described as a ‘turf war’ between Gresham House and Harwood Capital.
In October 2021, the board of Gresham House Strategic replaced its investment manager, Gresham House Asset Management (GHAM), with Harwood and put forward a motion to wind the trust up.
Harwood fought to keep it running but, with the backing of 93% of shareholders, the resolution passed.
Speculation mounted in March that Harwood was working to reverse that decision after Gresham House sold its nearly 24% stake in Rockwood – in part to Harwood.
An RNS update on Thursday confirmed that Harwood, which now holds 28.9% of the trust, is looking to do just that.
The board has proposed that the trust, “adopts a new strategy of active investment and believes that the experience of the Harwood investment team will provide the opportunity to create long-term value for shareholders”.
It added that the changes to the investment policy will enable Rockwood to “take advantage of the inefficiencies in the UK small cap market”.
If successful, the name of the trust will be changed to Rockwood Strategic.
Proposed changes to remuneration structure
If passed, there would also be changes to how Harwood is remunerated for its services. The fund group waived investment management and performance fees following the vote to wind up the trust in December.
While Rockwood’s NAV remains below £60m, Harwood will receive a reduced investment management fee fixed at £120,000 per annum.
Once the NAV hits £60m and above, it will be entitled to a management fee of 1% of NAV calculated as “one twelfth of an amount equal to 1% of the NAV before deduction of that month’s investment management fee and before the deduction of any accrued performance fees, payable monthly”.
In addition, Harwood would be entitled to a performance fee equal to 10% of outperformance over the higher of a 6% per annum total return handle and the high watermark.
Where the average NAV sits at or below £100m, performance fees are capped at 3% of the average NAV for the relevant period. Fees above the cap will be deferred to the next payment period.
If above £100m, the combined performance and management fees will not exceed 3% of the company average NAV. Any sums in excess of the cap will not be paid and will not be deferred.
Harwood’s appointment as investment manager is subject to a minimum term of one year, which expires on 5 November 2022.
