JP Morgan Cazenove is currently running a process to select new investment managers for the trust after Invesco Perpetual resigned from the mandate. A regulatory filing published on Tuesday morning noted four applicants to run the trust were worthy of further merit offering management fees ranging from 0.35% to 0.65%.
Last week, Invesco Perpetual used its 16% stake in the investment trust to call a general meeting to oust chairman Donald Adamson and management engagement committee chairman Richard Williams. Invesco Perpetual resigned as manager of the investment trust in April following a clash with the board over fees.
Invesco charged 2.15% over the last financial year for managing the fund with management costs representing 1.86%. Investors pay 20% for outperformance over Libor +1%, reducing to 10% for shareholders’ funds in excess of £80m.
Proposals to manage the Enhanced Income investment trust
| Manager | Fixed income AUM | Investment trust experience | Management fee proposal |
| Manager A | £11bn | No | 0.35% NAV |
| Manager B | £26bn | Yes | 0.39% NAV |
| Manager C | £79bn | Yes | 0.55% NAV |
| Manager D | $370bn | Yes | 0.65% NAV |
The asset management giant rejected the invitation to participate in the application process to act as investment manager of the trust. It has landed £12.3m in total fees from the £122m investment trust over the period from 2007 to 2017 inclusive, the filing noted.
“The board believes the responses received fully vindicate its position that significantly more attractive management terms are available in the market from managers of comparable quality and standing to Invesco,” the filing stated.
It stated no applicants had proposed to pay a performance fee to run the trust.
A requisition requires support from 10% of shares meaning Invesco Perpetual instantly had the numbers to take the action. It is supported by Practical Investment Fund and GAM Star Credit Opportunities, which hold 2% and 8% respectively.
The investment trust is managed by by bond duo Paul Causer (pictured) and Paul Read.
Out of the blue
The regulatory filing highlighted the tension behind the scenes as the board and Invesco fell out over fees.
The filing stated: “As shareholders are aware the board had been seeking to renegotiate management terms with Invesco. In fact it was informed in writing in April that Invesco had agreed to improved fee terms.
“This makes their subsequent resignation all the more disappointing. The agreed terms would have removed the performance fee and reduced the blended annual rate to 0.77%.”
However, the investment trust board noted nearly all alternative options that have come forward to run the trust are offering to run it for a lower price.
Leverage and dividend cover
The board has also played down the performance delivered by Invesco, stating leverage has bumped up returns.
It said a preliminary review of five-year performance suggested the investment trust’s unleveraged performance was at the mid-point of performance quoted in the proposals.
It said it is already concerned about the prospective returns from high-yield bond markets.
Additionally, it said dividend cover could be fully restored on lower fees and a positive contribution to reserves restarted.
Invesco appointments
The filing highlighted Richard Williams’s 25-years of fixed income experience.
Invesco has put forward Hazel Adam and Howard Myles as replacements.
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.
