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Iimia funds charge performance fees based on cash benchmark

Fund manager iimia has introduced three funds of funds which it says are the first FSA-authorised funds to base performance fees on a cash benchmark.

Iimia will receive 15 per cent of any outperformance above the sterling three-month Libor plus 2 per cent on the iimia ACD Services growth, iimia ACD Services growth & income and iimia ACD Services income funds.

The flexibility of the funds to invest in open-ended and closed-ended funds under Ucits II legislation enables the managers to invest in private equity through investment trusts while having greater fund choice on the open-ended side.

Using Japan as an example, few closed-ended funds invest in this area but managers have much more choice if they look for an open-ended structure.

The new funds have an initial charge of 5 per cent and a 1 per cent annual management charge. These charges are taken from capital on the income and growth & income portfolios but from income on the growth fund.

Director of regional sales David Crouchen says: “Most performance fees are linked to an index but we have introduced performance fees on absolute returns. Although two of the funds charge to capital, the target yield of 4 per cent is not excessive.

“If we had a higher target yield of 6 to 7 per cent, the prospects for capital appreciation as well as income would be limited and charging to capital would increase the risk of capital erosion.”

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