PROMINENT fund manager Geoff Wilson is the force behind a proposed charitable listed investment company that will rebate management fees to selected children’s charities.
The LIC — the first of its type locally — will be housed in the shell of the listed Australian Infrastructure Fund, targeting share subscriptions of $100 million to $200m.
The AIF sold its main assets — stakes in the Melbourne, Perth and Darwin airports — earlier this year to the Future Fund for $2 billion.
The new LIC, to be called the Future Generation Investment Fund, will be based on a fund-of-funds principle, by which prominent external managers invest the funds on normal commercial principles. They will not receive any fees, with 1 per cent of the fund’s net assets — the typical base fee for an active manager — earmarked for the charities.
Mr Wilson said so far he had secured the support of Paradice Investment Management’s David Paradice, Australian Leaders Fund’s Justin Braitling, Regal Funds Management’s Phil King and LHC Capital’s Steve Aboud, who previously managed the Lowy family’s private investments. “We have what I believe to be the best fund managers in Australia,’’ Mr Wilson said.
Active managers typically charge 1-2 per cent and a 15-20 per cent performance fee.
Mr Wilson said it was also hoped that, except for the external auditor, other service providers to the fund would also waive their fees. The proposal was inspired by a British equivalent, the £200m ($360m) Battle Against Cancer Investment Trust. The proposed fund is a listed variant on funds management veteran Chris Cuffe’s Third Link Growth Fund, which also boasts a who’s who of underlying managers including Colonial First State, Cooper Investors, Eley Griffiths, Goldman Sachs Asset Management and Montgomery Investment Management.
Third Link, which has $67m of funds under management and aspires to grow to $150m, claims a 9.2 per cent annual average return since inception in 2008, with a one-year return of 17.9 per cent.
The AIF has $3.5m of residual cash. Mr Wilson plans to supplement this with $1m, to facilitate a buyback for existing holders who want to exit the stock at net asset backing of half a cent per share.
“We will use that vehicle to do a placement and raise as much as we can,’’ he said.
The proposal is subject to approval by the AIF’s 11,000 shareholders, with a meeting planned for June.
“The investment objectives of the company will be to preserve shareholder capital, provide a growing stream of fully-franked dividends and to provide capital growth,’’ AIF says.
One observer dubbed the proposal as a “Robin Hood” fund, in that it transfers money from well-heeled fund managers for the benefit of both investors and the charities. Presuming the funds perform as expected, investors benefit because in effect they pocket the forgone fees over and above the 1 per cent earmarked for the charities.
The fund managers themselves are only disadvantaged at the margin, as the capital allocated from the LIC is invested alongside their existing funds.
“We assume the yield will be a combination of flow-through yield from investment and then anycapital gains distributed by the funds,” Mr Wilson said.