Manager Research

Coronation recently announced changes to the fee structure on their offshore equity funds, where the performance fees are being dropped in favour of fixed fees. The latest changes to the fees ware prompted by new regulations affecting Irish domiciled UCITS funds, in anticipation of regulatory ranges across the European Union. Going forward, regulators are expected to standardise the performance fee calculation methodology that asset managers may charge in UCITS regulated funds. Coronation don’t believe that the new methodology aligns managers with investors properly and have therefore decided to drop performance fees altogether.

The fees will be changed as follows:

The current fee structure allows for a 20% performance fee to be charged over rolling two years (with a cap), but also for a discount if the funds underperform over rolling 5 years. The performance fees will cease to be applied on the 30^th of September 2019, and the new fee structures will be implemented on the 1^st of October. However, the discounts, where applicable, will continue to be applied up to the end of September 2020 in the Emerging Markets fund, and up to the end of March 2021 in the Global Equity Select and feeder Funds.

We are increasingly seeing global managers move away from performance-based fees towards fixed rate fee structures. While we aren’t necessarily against performance fees, it has to be implemented fairly (i.e. symmetrically) and also align manager’s incentives with those of investors. It therefore makes sense for Coronation to drop performance fees if they consider the latter to be ineffective. That being said, Coronation are pricing themselves at the upper end of the fee scale compared to competitors in the global equity space.

We have retained our ratings on the funds as indicated above.