Orbis has lowered the performance fee charged across its UK fund range to be “more favourable” to investors as it anticipates better times ahead for its contrarian stockpicking approach.
From 1 June, the performance fee on the Global Cautious, Global Balanced and Global Equity funds will drop from 50% to 40%.
Orbis covers all operating costs for running the funds, meaning there is no fixed fee to invest. But it does charge a fee if its funds outperform their respective benchmarks. Said fee is held in a reserve and is refunded in the event of subsequent underperformance.
On top of this, fees paid to Orbis from the reserve are capped at 2.5% of AUM and are only paid if investment performance is sustained over the long-term.
Dan Brocklebank (pictured), director UK, Orbis Investments, said the group’s unique fee structure had been adjusted to be “more favourable to clients”, following improving performance for its funds as markets move to “a more valuation-driven mindset”.
“As fundamental, long-term contrarian investors we are excited about our potential to deliver value for our clients in the current environment,” he said.
“Rather than sharing outperformance in a 50:50 ratio, from 1 June onwards, we will lower the fee rate to 40% of outperformance so that clients will retain a clear majority (60%) of future outperformance generated.”
The £63.2m Orbis Global Balanced fund is currently in the top quartile of the IA Mixed Investment 40-85% Shares sector, having returned 12.8% over the past year versus the average fund’s -1.9%.
The £18.1m Orbis Global Cautious fund has returned 9.7% during the same timeframe, better than the 1.1% IA Targeted Absolute Return average.
However, performance of the £79.4m Orbis Global Equity fund has been more mixed. On a one-year view it has generated -0.9%, only slightly better than the IA Global’s -1.3%.
Brocklebank added Orbis’ refundable fee model does a better job of aligning fund manager and client interests compared with the industry standard.
“To put the 40% in context, we must deliver top-quartile performance to receive average fees, and if we perform only in-line with the market, we will be cheaper than a tracker fund.
“We think this is a much fairer approach than most of the industry which typically charges a fee of around 1% of assets under management (AUM), whether performance is good, bad or indifferent. This can incentivise firms to focus on growth in AUM above all else.”
See also: Is there such a thing as a ‘good’ performance fee?
