Equity Trustees (EQT) has made changes to the fee structure of one of its funds and has introduced an initiative that enables current and future investors to select a performance fee option.
EQT’s Wholesale Flagship Australian Equities Fund has reduced its standard fee management expense ratio (MER) from 0.82 per cent to 0.72 per cent.
It has also introduced an alternative fee structure with a flat MER of 0.40 per cent and a performance fee of 20 per cent for outperformance of the S&P/ASX200 Accumulation Index.
“If investors believe we will repeat our historical performance then the reduced flat fee option will be best for them, however, if investors take a more conservative view, the alternative reduced fee plus the performance fee option is likely to be more appealing,” EQT chief investment officer Shaun Manuell said.
“Because this fee structure has a sliding scale, if we only outperform our benchmark by a small amount investors will pay less in overall fees than previously. However, if we achieve significant outperformance, investors will pay more in fees but will obviously be better off through higher returns.”
Variable fees have been pushed heavily in the institutional space as more fund managers start to move to a similar structure, Manuell said, adding that it will become common in the next few years.
It is unknown whether investors in the flagship fund will favour one fee over the other, he said.
“We’ll find out once people start taking an option but there’s debate at the moment about whether active managers can add any value.”
“Although we think that over nine years we clearly have demonstrated that we have historically [outperformed], that still doesn’t stop that doubt, so people who want a more variable fee structure can adopt it.”
The EQT Wholesale Flagship Australian Equities Fund is one of the few funds managed internally so further fee arrangements to other Equity Trustee funds are unlikely.
