#238728
Postby shootingstar » July 23rd, 2019, 5:59 pm
In case of interest, below is an extract from the complaint letter I submitted to Sarah Fitton. She has responded to say has been passed on.
FATKEN I see we are in broad agreement on the proposal...if you have time I would suggest you also write in on similar grounds. The more people who raise formal objections, then the better chance the proposals don't go through in my view.
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I have recently received by post various proposals relating to Albion Venture Capital Trust Plc including a planned change to the computation of Performance Fees on the VCT.
I am writing to indicate that based on my understanding of the changes, I do not support the proposals and will be voting against. I believe furthermore that should the planned changes be enacted, you are effectively treating investors like myself who recently invested unfairly (in my initial view breaching FCA “Treating Customers Fairly” guidelines). Therefore I wish to formally complain.
Among my main motivations for investing in Albion Venture Capital Trust Plc earlier in the year were 1) a high % of asset backed type investments in the portfolio currently which I felt over time might be realised 2) I felt performance fee aspects relating to the VCT were attractive relative to other VCTs. In particular with regard to point 2, the way I perceived it was that were the trust to experience a period of positive realisations (perhaps related to disposals of care homes and schools) my investment was positioned to fully benefit given that the trust had to make up a significant cumulative performance shortfall before any performance fee would be due.
I feel unfairly treated in that I do not recall any mention at all in marketing materials relating to the 2019 raise that a change in performance fees mechanism was being contemplated. I also specifically asked about whether my understanding of the performance fee situation was correct via email and received a response from Patrick Reeve.
As far as I understand them, the proposals constitute a significant shift of value to the investment manager and away from shareholders like myself in terms of the following
• It is proposed to reset the hurdle and remove the need for the trust to make up its cumulative shortfall
• It is proposed to more than double the performance fee, from 8% to 20%
• It is suggested to switch to an RPI+2% hurdle, which is currently a bit lower than the 5% existing hurdle
I believe furthermore that the increase in performance fees may damage the attractiveness of the VCT for investors and potentially over time contribute to a widening of discount to NAV and a destruction of shareholder value
I appreciate that it is also proposed to reduce the total expenses cap but perceive that this does not offset my above concerns on performance fees.
I believe that the changes being proposed should be reconsidered. Should changes be implemented to performance fees then they should perhaps relate to new investments. Any capital gains from the sale of the care homes and schools over existing values I think should accrue wholly to shareholders.