UK-listed investment trusts face mounting pressure to revolutionise their management fee calculations, potentially leading to substantial revenue reductions across the sector. The catalyst for this transformation emerged in December when Greencoat UK Wind, the nation’s premier renewable energy infrastructure trust, implemented a groundbreaking fee structure.
The trust’s decisive move to base fees on the lower of market capitalisation or net asset value could ripple through all 294 UK-listed trusts. Industry analysts project this shift could slash management fee revenues by 30 per cent—approximately £53 million—in the renewable energy infrastructure sector alone.
This seismic change arrives amid growing shareholder discontent, as investment trust share prices have consistently lagged behind their net asset values per share over the past two years. By November’s end, the average discount had reached 15 per cent, approaching levels not witnessed since the global financial crisis.
Data from the Association of Investment Companies reveals that excluding venture capital vehicles, these trusts command £265 billion in assets. Notably, trusts specialising in renewable energy and infrastructure investments have experienced particularly severe discounts as investors scrutinise the stated valuations of unlisted portfolios.
The implications for smaller trusts could be significant. Stifel analyst Iain Scouller warns that such fee structures might render some investment companies with modest market capitalisations unviable. Meanwhile, Ben Conway, chief investment officer at Hawksmoor Investment Management, emphasises the broader significance, stating that maintaining disconnected NAV increases and negative shareholder returns is unsustainable.
The real estate investment trust sector, managing nearly £21 billion in assets across 30 traded REITs, may be next to embrace this transformation. Supermarket Income Reit has already announced its transition to a market capitalisation-based formula from July 2025, potentially setting a precedent for others to follow.
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