Significant fund changes

Change to Perfomance Fees

From 1 January 2017 there will be changes to the way performance fees are calculated on the Threadneedle UK Extended Alpha Fund and the Threadneedle UK Absolute Alpha Fund.
We are making these changes to improve consistency of performance fee calculation methodology across our fund range and in the case of the Threadneedle UK Absolute Alpha Fund, in recognition of the possibility of negative interest rates in the current low interest rate environment.
We believe that these changes will result in a fairer and more consistent performance fee structure across our fund range and are therefore in the best interest of clients.
What changes are you making?

Threadneedle UK Extended Alpha Fund – addition of excess return test

Currently, a performance fee¹ is payable on the Threadneedle UK Extended Alpha Fund when the relative return of a share class exceeds the FTSE All-Share Index (with income reinvested) by more than 2% over a calendar year.
From 1 January 2017, an additional condition – an excess return test – will be applied to ensure that a performance fee will not be applicable unless any underperformance from previous years has been recovered in full.
In all other respects, the way that performance fees are calculated on the Threadneedle UK Extended Alpha Fund remains unchanged.

Threadneedle UK Absolute Alpha Fund – change to Performance Benchmark

Currently, a performance fee² is payable on the Threadneedle UK Absolute Alpha Fund when its return exceeds the return from cash, measured as the Sterling 3-month London Inter-Bank Offered Rate with income reinvested (the “Performance Benchmark”), over a calendar year.
From 1 January 2017, the Performance Benchmark will be amended to be the greater of either the Sterling 3-month London Inter-Bank Offered Rate with income reinvested, or 0%.
This change is made in recognition of the historically low interest rate environment and the possibility of negative interest rates in order to ensure that a performance fee will not be charged where the Fund has produced negative returns.
In all other respects, the way that performance fees are calculated on the Threadneedle UK Absolute Alpha Fund remains unchanged.
¹ 20% of excess returns gained over the FTSE All-Share Index + 2%.
² 20% of excess returns over the Performance Benchmark.
Do I need to take any action?
You are not required to take any action as a result of these changes.
Further information
Further information is available in the Q&A in the Related Documents section, including illustrations of the performance fee calculation for both funds.
If you are unclear about any of the details relating to the changes, or have any further questions, please contact our Client Services Team in the UK on 0800 953 0134* (available from 8:00am to 6:00pm, Monday to Friday).

*Calls may be recorded.

Related Documents