Bankers, which is run by Henderson’s Alex Crooke (pictured), will now charge a flat 0.4 per cent fee, rising to 0.45 per cent on 1 November 2013. This replaces a charge of 0.3 per cent plus a performance fee calculated on NAV over a three-year rolling period.
Charles Cade, head of investment companies research at Numis Securities, said: "In our view, Bankers is well placed to take advantage of the opportunities generated by RDR, and we can understand the board's decision to remove the performance fee."
"The expense ratio is currently 0.42 per cent and although this will rise as a result of a higher flat fee, the fund’s charges remain highly competitive."
By comparison, the average total expense ratio on a fund in the IMA Global sector is 1.63 per cent, according to data from FE Analytics. In the IT Global Growth sector it is 1.08 per cent.
The Bankers trust is a top-quartile performer in its sector over three years, having returned 40.42 per cent, while the average trust has made just 27.39 per cent. The portfolio’s benchmark, the FTSE All Share, is up 27.5 per cent in that time.
Performance of trust vs sector and benchmark over 3yrs
Source: FE Analytics
Crooke’s portfolio has also significantly outperformed the index over five years – returning 41.72 per cent compared with 29.35 per cent from the All Share.
Cade says he rates the trust highly, but warns that its discount is one of the narrowest in the sector.
"Bankers has been a solid long-term performer from a regional equity portfolio with a value and income bias," he explained.
"We regard Alex Crooke highly and the fund has an attractive yield [2.9 per cent] relative to most of its Global Growth peers."
"On the downside, the current discount to NAV of 4 per cent is tight, both in relation to its 12-month average of 8 per cent and to the peer group average of 9 per cent."
"The [trust’s] shareholder register is dominated by retail investors and private client stockbrokers, having repurchased almost 30 per cent of its share capital since 1999."
"Nevertheless, we believe that there remains a risk that the discount could widen again if markets have a setback."
Although investment trusts are more volatile and therefore more risky than unit trusts, Crooke’s is actually marginally more stable than the FTSE All Share over the past three years.
Its three-year annualised volatility is 16.42 per cent, while the FTSE All Share’s is 16.72 per cent, according to data from FE Analytics.
The portfolio’s maximum drawdown – the most investors could have lost if they had bought and sold at the worst possible moments – is 14.57 per cent, lower than the 15.94 per cent of the index.
However, the maximum gain of 18.61 per cent is higher than the All Share’s 12.12 per cent, which suggests Crooke has effectively protected investors’ capital while taking advantage of upswings in the market.
Crooke has managed the trust since June 2003. Over 10 years it has returned 178.35 per cent, while the All Share is up 148.33 per cent.
Performance of trust vs sector and benchmark over 10yrs
Source: FE Analytics
Bankers did well at protecting investors' capital during 2008, losing just 21.59 per cent while the index and sector average were down 29.93 and 30.13 per cent, respectively.
However, it rebounded more slowly in 2009, making just 20.81 per cent while the sector was up 31.13 per cent.
This relatively steady performance may appeal to retail investors who are concerned about the volatility of investment trusts.
Crooke currently has 44.7 per cent in the UK and 21.4 per cent in the US, with 12 per cent in Asia ex-Japan and 11.1 per cent in Europe.
Cade explains that the removal of the performance fee has two motivations, the first of which is to increase the transparency to investors. Secondly, generating consistent returns has become harder after the financial crisis, making such a fee structure less attractive to management.
"Over the past decade, investment companies have increasingly introduced performance fees. This provided the managers with significant potential upside, typically in return for a modest reduction in the base fee," Cade said.
"Performance fees are not usually included when calculating expense ratios. However, there is a growing consensus that simplicity is an advantage if funds are to attract interest from retail investors/IFAs following the implementation of RDR, as there is expected to be a growing emphasis on transparent charging structures."
"Moreover, the appeal of performance fees to management groups has declined as the multiples applied to such unpredictable revenues are far lower than on regular fee income."
"We are aware of three investment trusts that simplified their fee structures by removing performance fees (and increasing base fees) during 2012: Securities Trust of Scotland, Standard Life UK Smaller Companies and JPM US Smaller Companies."
Harry Nimmo’s Standard Life UK Smaller Companies Trust is the standout fund on the list.
It is the top-performing UK smaller companies trust over five and 10 years, having made 661.97 per cent over the past decade while the average fund in the sector is up 279.83 per cent.
The trust ditched its performance fee in June 2012 and the total expense ratio is now 0.97 per cent.