Albion Venture Capital Trust plc is proposing to rebase the incentive fee for its investment manager. The proposal looks too generous and will result in far too much of the value going to the managers and too little to shareholders. The new proposed threshold of RPI plus 2% is too low and the 20% share is too high. It would be very bad precedent if this was passed and became the norm for other VCTs. I recommend shareholders attend the AGM on 21 August 2019 and vote against the Resolution at the General Meeting to be held immediately following the AGM.
See https://tinyurl.com/yywn3rr8 for more info about Albion’s proposal.
See https://www.sharesoc.org/campaigns/vct-investors-group/ for more info about our VCT Campaign.
Cliff Weight, ShareSoc Director
Disclosure: I own shares in Albion VCT.
I completely agree with this post re Albion, there is a very good and apparently informed discussion on exactly this topic currently being conducted on Lemon Fools site, one poster there points out that KAY, also in the Albion stable, changed their scheme to the same hurdle (RPI+2% which is too low anyway, realistically), but only a 15% cut above that hurdle, not the 20% for AAVC, surely it makes sense to have all VCT’s in the same stable to have the same deal ?
Historically Albion have treated investors pretty fairly, I wonder how much thought has really been put into this proposal ? It looks a greedy proposal to me.
Good spot Cliff. I’ve just returned from holiday to find this in my postbag. I’ve written to Albion, noting that this Modest Proposal would trigger an immediate annual cash bonanza for the managers of a quarter million pounds, should they match the relatively modest historical return of 6.5% p.a.
(6.5% minus RPI of 2.7% and 2% hurdle, times 20% times the asset base gives £240,000 per annum).
Or looked at another way, given that this mature VCT only needed to make investments of 2.3 mio last year, this performance fee (to incentivise new investment) represents 11% of new investments made.
The proposed reduction in the TER is a bit of a red herring as it is of no effect.
I wrote to Albion & received a reply yesterday, full of PR spin, yet it was written by the managing partner, not an independent director nor the company secretary, they seem determined to do nothing and to press ahead regardless. Any suggestions ?