Lowland Investment Company has removed its performance fee and reduced the threshold at which the trust’s tiered management fee reduces.
Lowland told investors in an announcement on Friday afternoon that its performance fee would no longer apply from 1 October.
Meanwhile, it added, the level at which its management fee drops from 0.5% of net chargeable assets to 0.4% will reduce to £325m, from £375m, from the same date. The trust currently has net assets of £270m.
Lowland's performance fee had been based on 15% of the net asset value total return outperformance over the FTSE All-Share +10%, measured over three years, according to broker Numis Securities.
Numis noted the performance fee has not been paid since the trust's September 2017 year-end when it represented around 0.1% of net assets.
In the three years to 25 September, Lowland has lost almost a third in value, compared to its benchmark's loss of 8.95 and sector peers' 16.2%, data from FE fundinfo show. Over the past five years, Lowland is down 16.3%, versus its benchmark's 16.9% gain and a 1.1% positive return from peers.
Henderson on the defence
Co-manager James Henderson was forced into defending the trust's recent performance record on a recent call to clients, accepting "the five-year record is poor, [but] the ten-year record is still substantially above the index".
"Certainly, your start point always matters [and] I would prefer a ten-year start point to show the good times and the bad times, but it is certainly a question we grapple with."
He and co-manager Laura Foll also noted Lowland's dividend has grown by around 7% per year over the past 25 years. The payout has almost doubled from 30.5p in 2012 to 59.5p in 2019.
Lowland is up 85.9% over ten years, ahead of the All-Share's 61.7%, and Henderson noted its underperformance began in the immediate aftermath of the Brexit referendum.
At the time, Henderson recalled, the portfolio had quite a lot of UK domestic industrials in it, which it still has. "And it has been the UK domestic industrials that have been the real underperformer in the UK since June 2016," he explained.
"The overseas earnings have obviously been helped by the depreciation of the currency, and we had more in UK earnings; that has been a drag.
"Those earnings are now on very, very low ratings, and the problem is that holding those companies where there is still a real headwind, the pressure is to go more international [and] when I talk to fund managers that run portfolios for clients, the most successful in recent years have had the least in the UK.
"But there is a value release - there is takeover activity [that] comes along, there are companies that, for all the gloom at the moment, are coming through with reasonable results. They just need some wind in their sails from a little bit of top-line sales growth, and we will be surprised by the results."