Perpetual Income & Growth axes performance fee

The investment trust previously charged 0.6 per cent on the first £500m of gross assets and 0.4 per cent on those above, but now charges 0.6 per cent a year on the first £900m of gross assets and 0.4 per cent thereafter, with no performance fee. The trust has assets of about £1.2bn.

"This represents an increase of £800,000 in the basic management fee (assuming gross assets above £900m) and we estimate that this adds approximately 0.08 per cent to the ongoing charge," say analysts at Canaccord Genuity.

They estimate that the new ongoing charge will be 0.72 per cent - much lower than the latest 1.06 per cent figure - because the trust's performance fee has made a substantial difference. For the trust's financial year ended 31 March 2016, with the 0.42 per cent performance fee the trust's basic ongoing charge of 0.64 per cent rose to 1.06 per cent. And for the financial year ending 31 March 2015, its basic ongoing charge of 0.65 per cent rose to 1.23 per cent with the 0.58 per cent performance fee.

Perpetual Income & Growth's performance fee for its financial year to 31 March 2016 amounted to £4,040,000, and for the year before £5,282,000. The performance fee paid to Invesco Fund Managers is equal to 10 per cent of the value of any outperformance of the FTSE All-Share index, but cannot exceed 0.5 per cent of the value of the trust's net assets.

Over the year to 31 March 2017 the trust underperformed the FTSE All-Share index, so the performance fee should not be levied for this period. The underperformance is partly because Perpetual Income & Growth has low or no allocation to areas such as mining and oil & gas, which rallied last year.

Bill Alexander, the trust's chairman, says its board is making the fee changes because it is "mindful of the need for it to be competitive in the wider marketplace and responsive to that market and to shareholders", while "these changes should help to ensure that the company continues to be an attractive investment in the future".

It is the latest in a series of performance fee removals, with more than 40 investment trusts having done this in the past few years, according to the Association of Investment Companies (AIC). Other trusts that have recently abolished their performance fee include F&C Commercial Property (FCPT) and BlackRock Latin American (BRLA).

"Earlier this year, we highlighted how equity investment companies were encountering intensifying headwinds, most notably from lower ongoing charges for open-ended funds, the seemingly inexorable growth in passive fund management and increasing demand for alternative investments," say analysts at Canaccord Genuity. "Against such a backdrop, it is critical that investment companies remain cost-competitive."

If Perpetual Income & Growth's ongoing charge falls to 0.72 per cent it will become a cheaper way to access manager Mark Barnett's stockpicking skills than his Invesco Perpetual Income (GB00BJ04HX60) and High Income (GB00BJ04HQ93) funds, which can be bought from investment platforms for ongoing charges of 0.86 per cent and 0.87 per cent, respectively.

But the cheapest way to access Mr Barnett remains Edinburgh Investment Trust (EDIN), which has an ongoing charge of 0.61 per cent. The vast differential between their ongoing charges was the reason why we dropped Perpetual Income & Growth from IC Top 100 Funds last year and replaced it with Edinburgh.

Investment trusts that have recently dropped their performance fees

Source: AIC