Chrysalis Investments has changed its performance fee structure after receiving criticism for a £60mn pay day for its managers last year just before a market turn annihilated its net asset value.
However, commentators have called the change “greedy” and “a failure of the board”.
In a statement this morning (November 30), Jupiter, which manages the company, said after discussions with the board of the trust it has agreed to lower the overall performance fee from 20 per cent to 12.5 per cent of returns above a certain benchmark level.
These performance fees will now be paid solely to the managers of the trust, and not Jupiter itself as had been the case.
In addition, the issue price of the shares will be set by the higher of two markers, share price or net asset value, at year-end.
Andrew Haining, chairperson of Chrysalis said: ““This is an attempt to draw alignment more to the share price.
"Jupiter central has waived its right to any future share in performance fees and the resultant smaller performance fee is designed to be for incentivising and retaining the management team.”
A shareholder in Chrysalis, Richard Parfect, portfolio manager at Momentum, said: “It’s good to see the high water mark has been honoured and there is a material reduction in the rate of the performance fee.
"Additionally, the alignment of interest to equity is very important and has a meaningfully long earn out period on that equity...this brings the alignment onto a much more long term footing.”
However, Ben Yearsley, director at Fairview Investing, said on Twitter: “After such an egregious fee paid last year surely the right thing to do was scrap it altogether.
“But no[,] they’re still being greedy.”
Mark Dampier, former research director at Hargreaves Lansdown, agreed, adding: “A failure of the board.
“For all the good media comment about independent boards, sometimes they don’t work.”
The trust came under fire last year after paying £117mn in performance and management fees for the year to the end of September 2021, including £60mn to its two managers, Richard Watts and Nick Williamson.
The trust, which launched in 2018, focuses on investing in unlisted companies and backed a number of technology firms that boomed in 2020 and 2021.
However, when the market turned against growth stocks in early 2022, the trust’s fortunes turned too, and the trust’s value crashed from £1bn to £383mn as of November 29 this year.
In the year to November 29, the trust lost 73.82 per cent compared with a 53.6 per cent loss for the sector.
A spokesperson for Jupiter said: “We are fully focused on improving returns for Chrysalis’ clients and removing Jupiter’s performance fee was the right thing to do, ensuring that our interests remain fully aligned.”