The Scottish Mortgage Investment Trust has announced that the management fees paid to Baillie Gifford are to be reduced. They are coming down from 0.32% to 0.30% of net assets per annum. This reduction is surely to be welcomed, and there is no performance fee at this trust.
The Chairman of the company, John Scott, said: “Both the Board and Managers are keenly aware that low charges have a major impact on long term returns especially when compounding is taken into account. Scottish Mortgage has grown steadily over the years and it is fortunate that its scale with total assets of around £3bn allows this reduction to be made. Further reductions would be considered if assets continue to grow.”
It is of course the case that investment trusts often grow faster than inflation whereas their costs (particularly administration costs) tend to be more in line with inflation. The manager therefore often benefits as a result, to the disadvantage of investors. Few investment trusts reduce the fees paid on a percentage basis to the manager from the historic increase in the size of trusts, or recognise the economies of scale that apply in other ways.
They should do so.