Internal review leads to K2 fee cuts

12-Jul-2017

By Megan Tran

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K2 Asset Management has reduced the management and performance fees for three of its managed investment funds as a result of an internal review of the company.

Speaking to financialobserver, K2 head of retail distribution Damian Craven said a review of the company’s internal structure led to the changes and the fee structure had not been adjusted since its inception in 1999.

“The objective from the start was to get 15 per cent per annum plus, which was quite tough to get this return expectation, [and] then the fees need to follow accordingly to this,” Craven said.

The fee changes had resulted from the fund manager’s review of its distribution and pricing strategy, and involved industry and client feedback, he said.

He said K2 believed the move would benefit existing and new unitholders.

In May, the company announced the reductions, as well as additional changes to the K2 Select International Fund and K2 Australian Small Cap Fund, with the performance fee hurdle rate increased to 6 per cent a year.

The process took a few months to come to fruition and a decision was made at board level in March.

Craven revealed it took some time for the organisation to understand what the market wanted in terms of fee structuring for active managers.

“It went to assessment and consulting with existing and prospective clients about what was appropriate. The feedback was the fees were too high and needed to be adjusted and brought back to peer group expectations,” he said.

The feedback had been positive about the structural and transparency alterations, with the majority of comments relating to openness regarding company operations, he noted.

“We’ve increased our cash exposure from 16 per cent to 50 per cent across all strategies. This was done in April with the view around where we are at in the economic table and how to take the risk off the table for investors,” he said.

“Previously the business would not have told anyone and there needed to be more communication on where we sat and how we think as active managers of clients.”

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