Invesco Perpetual, Practical Investment Fund and GAM Star Credit Opportunities have demanded a general meeting be called on behalf of shareholders to vote for chairman Donald Adamson’s removal, according to a regulatory filing published by the investment trust this morning.
It also calls for the removal of Richard Williams, who is chair of the investment trust’s management engagement committee.
The shareholders have put forward Hazel Adam and Howard Myles as replacements.
“This is turning into a quite an acrimonious debacle,” said Tilney managing director Jason Hollands.
Invesco announced it was stepping down as investment manager on the investment trust in April. It did not announce the reasons behind the move, but Portfolio Adviser understands the board and the asset manager clashed over the charging of performance fees.
The £121.3m investment trust is managed by by bond duo Paul Causer (pictured) and Paul Read. The pair separately run large amounts of assets in other funds such as the £3.2bn Monthly Income Plus and £2.7bn Distribution funds.
“It is highly unusual for an investment company client to be fired by its investment manager in the first place, and so it is very clear that negotiations over the fees between the board and Invesco Perpetual went sour and broke down,” said Hollands.
“As a relatively small and less liquid investment company, it is understandable that some of the institutional shareholders are very unhappy about the way things have played out and gunning for the chairman.”
The investment trust said it is still seeking proposals from potential alternative managers, but noted it will send a convening notice to shareholders in due course.
Adam is a director on the Aberdeen Latin American Income fund.
Myles is a director on the Aberdeen Private Equity fund, Baker Steel Resources Trust Limited, BBGI Sicav, JP Morgan Brazil Investment Trust, Lazard World Trust Fund, Small Companies Dividend Trust and The Forest Company.
The performance fee
The investment trust currently has a management fee of 1.0% on the first £80m of net assets, 0.7% on the next £70m, and 0.6% on net assets exceeding £150m, according to Numis. Investors pay 20% for outperformance over Libor +1%, reducing to 10% for shareholders’ funds in excess of £80m.
Performance fees are subject to a number of constraints and include:
- The performance fee payable in respect of any year will not exceed the aggregate base management fee paid in that year
- The performance fee will only be earned if total returns exceed 7% for the year and a NAV high watermark is surpassed.
- For each year in respect of which a performance fee is earned, 30% of the fee will be deferred, and only be payable subject to the company surpassing a NAV high watermark in any one of the next three accounting periods and maintaining a dividend pay out of at least 5p per share for each accounting period up to the crystalisation of the deferred payment.
The ongoing charges figure (OCF) for the investment trust in the last financial year to September 2017 was 1.22% or 2.15% including the performance fee.
