The £5.1bn Scottish Mortgage Investment Trust has announced plans to cut its annual management fees from April 1 as it prepares to enter the FTSE 100 index for the first time.
Scottish Mortgage, which is managed by Baillie Gifford, said the cut in fees was in “recognition of its continued growth and success” as it will enter the FTSE 100 from March 17 2017.
The investment company currently has an ongoing charge of 0.45 per cent for the year to March 31 2016, with an annual management charge of 0.3 per cent. But following the company’s growth in scale Baillie Gifford has offered a further fee cut “as part of the ongoing efforts by all parties to leverage the benefits of increasing scale for shareholders, primarily through reducing costs”.
From April 1 2017 a tiered fee scale will be introduced, with a continued annual management charge of 0.3 per cent on the first £4bn of assets under management, falling to 0.25 per cent thereafter.
James Anderson, co-manager of the trust and partner of Baillie Gifford said: “The opportunities ahead are compelling but we need to keep improving and cutting costs is a vital and underestimated part of this process.”
John Scott, Chairman of Scottish Mortgage, added: “Admittance to the FTSE100 is a milestone for the company. It reflects the trust’s strong investment performance over the past 10 years, in addition to which our assets have grown on the back of the issuance from treasury of over 130 million shares in the past three years.
“Our size also brings economies of scale; I am delighted that we have agreed a reduction in the management fee. The flat rate of 0.3 per cent per annum which we have been paying was already amongst the lowest in the investment trust sector but I am delighted that, henceforth, the top tier of our assets will attract a fee of 0.25 per cent per annum.”
