EIS 2018 report (web)

64 65 INITIAL CHARGE AMC BREAKDOWN BY STRATEGY MARKET BREAKDOWN BY INVESTMENT STRATEGY There is now little difference in terms of average initial fee between Growth and Capital Preservation and Growth offers. Both have risen in comparison to historical offers. The mode for Growth offers is even higher at 5%, with over a third of 2017/18 Growth offers applying this rate (whether it is charged to the investor or the investee). This might signal Growth managers looking for better upfront compensation for the increasing risk they are being required to take. Across the strategies, the AMCs have not changed substantially. AVG MODE MIN MEDIAN MAX AVG MODE MIN MEDIAN MAX 2017/18 OFFERS CAPITAL PRESERVATION & GROWTH GROWTH 8% 6% 5% 4% 3% 2% 1% 0% 7% HISTORICAL OFFERS CAPITAL PRESERVATION CAPITAL PRESERVATION & GROWTH GROWTH GROWTH & INCOME SUPER GROWTH 4.5% 3% 2.5% 2% 1.5% 1% 0.5% 0% 3.5% 4% HISTORICAL OFFERS CAPITAL PRESERVATION CAPITAL PRESERVATION & GROWTH GROWTH GROWTH & INCOME SUPER GROWTH 12% 8% 6% 4% 2% 0% 10% 2017/18 OFFERS CAPITAL PRESERVATION & GROWTH GROWTH 3% 2% 1.5% 1% 0.5% 0% 2.5% “The performance hurdle mode for Growth at 100%, does not present the type of challenge that a Growth manager might expect to meet.” EXIT PERFORMANCE FEE EXIT PERFORMANCE HURDLE There have certainly been some high, and slightly questionable, exit performance fees in the past in both Growth and Capital Preservation and Growth. For 2017/18 offers, there are no real surprises, with these fees staying around the 20% mark, and with the average for Capital Preservation and Growth (where Growth is not the only focus), slightly lower overall than Growth. As we might have predicted, the hurdle rates for Growth products are, on average, a little higher than Growth and Capital Preservation offerings, although the mode for Growth at 100% (almost half of the 2017/18 Growth offers apply this rate) does not present the type of challenge that a Growth manager might expect to meet. We would expect this to rise as it becomes less acceptable to merely target capital repayment plus tax relief qualification. HISTORICAL OFFERS 80% 90% 40% 60% 20% 70% 30% 50% 10% 0% CAPITAL PRESERVATION CAPITAL PRESERVATION & GROWTH GROWTH GROWTH & INCOME SUPER GROWTH 2017/18 OFFERS 40% 25% 20% 10% 15% 35% 30% 5% 0% CAPITAL PRESERVATION & GROWTH GROWTH 250% 150% 50% 100% 200% 0% 2017/18 OFFERS GROWTH CAPITAL PRESERVATION & GROWTH HISTORICAL OFFERS 250% 150% 50% 100% 200% 0% GROWTH CAPITAL PRESERVATION CAPITAL PRESERVATION & GROWTH GROWTH & INCOME SUPER GROWTH AVG MODE MIN MEDIAN MAX AVG MODE MIN MEDIAN MAX