Gresham House Strategic has dropped Gresham House Asset Management as its investment manager following a strategic review.
In an update today (October 11), the trust said it had entered into a new investment management agreement yesterday with Harwood Capital, subject to approval by the Financial Conduct Authority.
This comes as in May, the firm served its 12 months' protective notice of termination on Gresham House Asset Management Limited following concerns about the trust's share price discount to net asset value which was preventing it from raising additional equity.
The discount sat at 6.3 per cent on March 31, 2021, down from 15 per cent in March the previous year..
Today the trust said it has terminated with immediate effect its investment management agreement with GHAM after an “extensive process” .
It highlighted one of the key benefits of the change was a significant reduction in management fees.
Under the agreement with Harwood, management fees will reduce from the current level of 1.5 per cent of net asset value per annum to 1.25 per cent of NAV up to £25m and 1 per cent of NAV thereafter per annum.
If the NAV of the trust exceeds £100m, Harwood has agreed to cap aggregate performance fees and management fees at 3 per cent of NAV.
Helen Sinclair, interim chairwoman of Gresham House Strategic, said: "We, as the independent directors, firmly believe that Harwood has demonstrated exceptional expertise over the long-term as a specialist investor in public and private equity. Harwood intends to commit capital to investing in the team and marketing the company.
“The independent directors believe that this, coupled with continued strong investment performance, will help achieve appropriate scale and close the discount over the medium term.
"All these initiatives are in the long-term interests and benefit to shareholders. The management fees are competitive, saving shareholders approximately £270,000 on an annualised basis based on the NAV published on 4 October 2021.”
Sinclair added: “The reduction in performance fees should be even more material for shareholders. We would like to thank GHAM for their role as investment manager and the delivery of shareholder value during their tenure."
The trust said all of the independent directors of the board had backed the appointment of Harwood as the company's new investment manager based on the firm's investment track record in small cap equities and the proposed appointment by Harwood of Richard Staveley as lead fund manager.
There will be no material change to its existing investing policy, it added.
However, the firm’s name will be changed to Rockwood Strategic plc, conditional on the appointment of Harwood as manager becoming effective.
Christopher Mills, chief executive officer of Harwood, said: "In taking over the investment management of GHS, we firmly believe we can enhance value for the benefit of all shareholders.
"We are providing continuity of fund management by bringing in Richard Staveley to manage the company, a role he previously undertook, during which time he drove the company's investment strategy and oversaw excellent performance, as recognised by the independent directors.