European Assets looks to cut charges with a tiered fee

The trust, one of our IC Top 100 Funds, now charges 0.8 per cent a year for funds up to a value of €500m (£443.62m) and 0.65 per cent a year for those with a value above that.

It previously charged 0.8 per cent a year of the value of its funds under management, calculated as the value of total assets less current liabilities (excluding borrowings) at the end of the preceding quarter. And it excludes the value of any funds managed by the F&C group and 50 per cent of the value of funds managed by other managers.

Shareholders in the trust will not see an immediate difference as the trust had assets of about €493.6m as of 22 November, but if the trust continues to grow it could result in a reduction in its ongoing charge. This is currently 1.12 per cent.

European Assets is already one of the cheaper European smaller companies investment trusts, along with JPMorgan European Smaller Companies (JESC), which has an ongoing charge of 1.13 per cent.

But its ongoing charge is higher than those of the platform share classes of most open-ended European smaller companies funds which, for example on Hargreaves Lansdown, range between 0.8 per cent and 1.31 per cent. And only three out of 15 of these have an ongoing charge of over 1 per cent.

Since January 2013, following the Retail Distribution Review, commission payments to independent financial advisers by open-ended funds have been banned, and funds have introduced cheaper share classes that don't pay commission or offer private investors cheaper share classes previously only available to institutional investors. This means that most open-ended funds now have an ongoing charge below 1 per cent and there is pressure on investment trusts to remain competitive. As a result a number of trusts have reduced their fees in recent years, and some have scrapped their performance fees. Performance fees are virtually unheard of among open-ended funds.  

There is pressure on investment trusts to remain competitive. As a result a number of trusts have reduced their fees in recent years, and some have scrapped their performance fees

These include Henderson Far East Income (HFEL), which has introduced a tiered structure. It used to charge 0.9 per cent a year, calculated as 0.225 per cent a quarter. But with effect from 1 September 2017 this level only applies to net assets up to £400m, with those above that charged at a reduced rate of 0.75 per cent a year, or 0.1875 per cent a quarter.

Henderson Far East Income had net assets of £466m as of 22 November and has an ongoing charge of 1.12 per cent.

Impax Environmental Markets (IEM) has simplified its management fee. It previously charged 1 per cent a year on net assets up to £200m, 0.9 per cent on those between £200m and £300m, 0.825 per cent on those between £300m and £400m, and 0.8 per cent on those in excess of £400m.

But since 1 October it charges 0.9 per cent a year in respect of the first £475m of net assets and 0.65 per cent thereafter. It has assets worth £529m.

John Scott, chairman of Impax Environmental Markets, said: "At our current size this offers a modest reduction in the fees paid to Impax Asset Management and as our assets grow we expect to see a material reduction in our operating cost ratio, reflecting the new fee rate of 0.65 per cent on net assets in excess of £475m."

The trust has an ongoing charge of 1.13 per cent.

Jupiter US Smaller Companies (JUS) has scrapped its performance fee with retrospective effect from 1 July 2017. And, since 1 October 2017, its base fee has reduced from 0.8 per cent of total assets a year to 0.75 per cent of adjusted net assets up to £150m (excluding any drawn down bank debt), 0.65 per cent of those between £150m and £250m, and 0.55 per cent of those over £250m. It has assets of £165m.

The trust's board says this is to ensure its charges are competitive relative to those of comparable investment trusts and the institutional unit class of Jupiter US Small & Midcap Companies Fund (GB00BJT32C83), which is run by the same manager, Robert Siddles.

The trust currently has an ongoing charge of 1.01 per cent because it did not incur its performance fee in its last financial year. Jupiter US Small & MidCap Fund can be purchased from platforms from 1.05 per cent.