The board of the Polar Capital Technology Trust has proposed a number of changes to the management fee to reflect the growing assets and strong performance of the vehicle, as well as the impact of MiFID II on the rules around research costs.
Under the new arrangement, the trust will no longer make any contributions towards research costs and will pay less in marketing costs, while it will also introduce a new lower fee tier and will amend the performance fee.
Currently, the trust has a tiered management fee, with a base fee of 1% of NAV up to £800m, reduced to 0.85% on assets between £800m to £1.7bn. On 1 January 2018, a temporary lower fee of 0.80% on assets over this threshold was introduced.
The board has agreed to make the third-tier fee permanent on assets above £1.6bn, while it also plans to introduce a fourth tier charged at 0.70% on NAV above £2bn. The trust currently has a NAV of around £1.8bn.
At the same time, the board is proposing to increase the incentive for the manager to beat the index during difficult market conditions by making the performance fee payable even in a year when the NAV has fallen, if the manager has outperformed its Dow Jones World Technology benchmark.
The board believes this would "potentially reward the manager for reducing risk"; however, the performance fee will be reduced from 15% of outperformance to 10%.
The cap on the amount of the performance fee that can be paid out in any one year, or upon the termination of the investment manager agreement without cause, is also being reduced from 2% to 1% of NAV.
In addition, the manager has agreed to pay for all research costs, starting 1 January, which amounted to around £447,000 in the calendar year 2018.
Polar will also contribute £100,000 per annum to the trust's external marketing costs. All the changes will come into effect on 1 May.
Over the past year to 12 April, the trust's share price has returned 19.5% and has its NAV has rised by 23.4%, against the IT Tech, Media & Telecom average of 18.2%, according to FE. It is trading on a discount of 5.9%.