Schroders slammed over Sloane performance fee

Date: Friday, August 6, 2010
Author: Chris Salih, FundStartegy

Ben Yearsley, a senior investment manager at Hargreaves Lansdown, has slammed Schroders for the performance fee structure the firm has introduced on its Sloane Robinson Emerging Markets fund.

Yearsley says that an annual management fee of 25 plus a 20% performance fee over US London interbank offered rate (Libor) is “simply too expensive”.

He says: “I think the performance fee is outrageous—how anyone could think using US Libor is a fair benchmark for an emerging market fund I really do not know.”

The Schroder Sloane Robinson Emerging Market fund was launched in June and sits within its Luxemburg-domiciled GAIA hedge fund platform. Sloane Robinson is a privately-held long/short equity manager focusing on emerging markets.

Last week, Peter Hargreaves, the chief executive of Hargreaves Lansdown, called for advisers to boycott funds which use performance fees, except in exceptional circumstances. (article continues below)

A Schroders spokeswoman says: “Where a fund has an objective to outperform a market index it makes sense to use the same market index for performance fee purposes.”

“However, where a fund is unconstrained by a particular benchmark like Schroder GAIA Sloane Robinson Emerging Markets fund, and aims to deliver absolute returns over the medium to long term while seeking to avoid deep drawdowns, other approaches make more sense i.e. performance fees on positive returns or outperformance over a hurdle, such as Libor.”