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St Laurence introduces performance fees

Tuesday 15th July 2003

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The rising tide of investor scepticism is one of the drivers of St Laurence’s new investment fund.

Its new fund Number One Portfolio Trust, which was launched yesterday, will not pay management fees until investors have received a basic rate of return.

“It’s quite a gripe investors have had, particularly those in overseas equities over the past few years,” St Laurence managing director Kevin Podmore says. “They are losing money but the fund managers are still taking their fees.”

The fund is made up of five separate funds, although more may be added as the opportunities arise.

In ascending order of risk, the five are the cash deposit fund (base rate of return 4% tax paid net of fees); the first debenture fund (4.5%); the first mortgage fund (5%) the property fund (6.5%) and the high yield fund (8%).

“If we can’t achieve the base return then no management fee will be paid,” Podmore says.

That set up will tend to push the funds toward the conservative end of the spectrum, he says.

“I think one of the issues is not that risk is bad, but that investors are aware of the risk they are getting into.”

The company is aiming to make the five funds as transparent as possible, says director Wayne McCarthy.

“If there is that risk there you disclose it for what it is.”

It is not only the crash in offshore equities that has made investors wary. Local junk bond issues such as Metropolis, and bad publicity about the secondary mortgage market, has not helped, says Podmore.

“One of the frustrations we have had is that we have been involved with other investments which have been relatively low risk, but which have been compared to junk bond issues and other things we would never have put our name to.”

Many investors have been burned by the secondary mortgage market, he says.

St Laurence takes its first steps

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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