The annual management charge on the £1.1bn Edinburgh Investment Trust (EIT), currently managed by Ed...
The annual management charge on the £1.1bn Edinburgh Investment Trust (EIT), currently managed by Edinburgh Fund Managers (EFM), is to be cut by 13% when Fidelity takes over its management on 31 July.
Under the terms of the agreement with Fidelity, the annual management fee will be set at 0.26% of funds under management, as opposed to the 0.3% charged by EFM.
At Fidelity, the portfolio of the UK growth trust, the retail shareholder base of which is currently around 40%-45%, will be structured using a team of UK equity managers in a multi-manager approach designed to provide a diversification of risk compatible with the trust's requirements.
The team will be lead by Peter Yarrow, senior director at Fidelity, who will also be responsible for the investment portfolio.
With the capture of EIT, Fidelity has increased its assets in investment trusts by 144%. Prior to being awarded the management contract for the trust, Fidelity had £764m in investment trust assets, managing four trusts ' Anthony Bolton's Euro Values and Special Values, Asian Values, managed by Yosawadee Polcharoen, and Japan Values, managed by Asako Kibe.
With the termination of EFM's contract to manage the trust, currently run by Robert Waugh, the group is expected to lose around £4m in revenue as the £1.1bn trust currently represents a sizeable portion of EFM's total. The group's assets currently stand at around£6bn. Some 8% of EIT's shares are held in EFM's own Isa wrappers and savings schemes.
Iain Watt, chief executive of EFM, said Fidelity's ability to undercut its management fees by about a third and the uncertainty caused by the Hermes bid for the EFM group were two decisive factors behind Fidelity's success.
In addition, there have been a number of changes of manager on the trust in the past two years. When Graham Campbell left EFM to join Scottish Widows Investment Partnership, the trust passed to Mike Balfour. Then, in October last year, it was handed to the trust's Waugh, who began to turn performance around.
Lord Eglinton, chairman of the trust, said: 'The board was impressed with Fidelity's qualities and the overall package. The Fidelity team was able to demonstrate that, as one of the largest fund management organisations in the world, it has sound investment credentials, solid corporate governance and the resources to manage the assets and gearing of the trust successfully.'
Eglinton stressed that increasing the proportion of smaller shareholders on the register is an aim of all investment trusts, so Fidelity's strength of resource, together with its ability to provide a range of distribution channels, was an important factor in the board's decision.