Standard Life’s private equity trust has simplified its fee structure as it looks to give investors a low cost way of accessing investments in private companies.
The trust’s board has decided to ditch the performance fee and the charge will now be 0.95 per cent of net assets. The total expenses ratio will be around 1.1 per cent.
The £533m European Private Equity vehicle is also set to double its annual dividend for 2017 to 12p per share, up from 5.4p.
The board has also decided to rename the trust, Standard Life Private Equity, to reflect its decision to increase the flexibility of the strategy by letting it tap into private equity investments outside of Europe.
Roger Pim, deputy head of SL Capital Partners, said he thought the changes, which include the simplified management fee, would boost the dividend and therefore be beneficial to shareholder returns.
“The objective of the strategic changes is to broaden the private equity opportunity without diluting the strategy and focus which has delivered strong performance for investors over many years.”
Yet Mr Pim said shareholders should not expect a radical shift in terms of geographic exposures.
The trust saw its share price grow by 27.9 per cent over the 12 months to 30 September, and its total return hit nearly 25 per cent over the period.
They believe this will pave the way for a period of strong returns in the future Matthew ReadThe deputy head also said the board was confident that the trust is well positioned to take advantage of market opportunities over the long-term.
According to Matthew Read, senior analyst at QuotedData, the private equity sector has tended to trade at wide discounts, particularly following the financial crisis when many trusts struggled from being over-leveraged as asset values collapsed.
However, trusts that were able to weather the storm and invest in cheap assets have recently benefited from a buoyant market for realisations and have generally been posting very strong returns, he said.
Mr Read suggested these returns have attracted investors back to private equity vehicles, which in turn has caused discounts to tighten.
He pointed out that Standard Life's trust has benefited from a strong period of realisations, with managers reinvesting some of the proceeds where they can find appropriately priced opportunities.
But the analyst also said the managers have allowed cash levels to rise in anticipation of being expect to be able to invest in assets more cheaply in the future when markets are less buoyant.
"They believe this will pave the way for a period of strong returns in the future."
Commenting on the price changes, Mr Read said the simplification of the structure made sense in what is a competitive fund space.
The hike in the dividend puts the trust on a prospective yield of just over 4.1 per cent, which puts the trust at the upper end of its peer group range.
