AMP Capital is cutting management fees and boosting governance in its Community Infrastructure Fund as it continues its fight to keep the A$1.4 billion ($1.03 billion; €876.6 million) vehicle.
In a letter to CommIF investors last week, AMP Capital’s co-head of infrastructure in Australia, Michael Bessell, outlined a fund enhancement proposal lowering management fees from 85 basis points to 80bps, with fees reducing to 77.5bps when the gross asset value of the fund reaches A$1.5 billion, and dropping to 75bps when the value of the fund reaches A$2 billion.
Effective from 1 August, the new fee structure will also see a 2.5bps rebate offered to unitholders with a 1 percent holding, with a further 25 percent discount on the reduced management fee on offer for the next 12 months.
In addition to reducing fees, the firm said it would review how it implements asset management services for the special purpose vehicles tied to the public-private partnership assets in its portfolio. Currently, AMP Capital provides asset management services for many of these assets. Going forward, it plans to increase governance for the fund by seeking the approval of AMP Capital’s responsible entity independent board committee before entering into any related party asset management agreements for CommIF assets.
“As foreshadowed, with the fund reaching towards A$1.4 billion FUM in scale, we have reviewed the existing management and service arrangements for CommIF and determined to offer a compelling proposal which includes reduced fees and enhances governance of the fund,” Bessell said in AMP Capital’s letter to CommIF investors.
“This decision underscores AMP Capital’s commitment to CommIF and to ensuring high-quality asset management services as a fair and competitive cost to unitholders with independent oversight. The combination of the new fee structure, continued fund performance, enhanced governance and our investment experience ensures that AMP Capital will continue to provide market-leading management of CommIF.”
In a statement, a spokesman for Plenary told Infrastructure Investor: “While it is flattering that AMP Capital has now moved to virtually match our fee proposal, it cannot match our cultural stability, the expertise of our proposed investment team, our independent governance and laser-like focus on managing community infrastructure. It’s a long-term view we are taking, and we remain convinced that our proposal is absolutely in the best interests of investors for a host of reasons that go beyond fee reductions.”
Speaking to Infrastructure Investor, a source close to AMP Capital highlighted the “opportunistic” timing of Plenary’s bid to take over CommIF, despite the fund consistently performing well under AMP Capital’s management.
Acknowledging a roughly year-long period of uncertainty experienced by AMP Capital – thanks to the possibility of a takeover by Ares Management Corporation – the source said the recently proposed demerger and public listing of AMP Capital’s private markets business, as well as the appointment of a new chief executive to lead the firm, signalled a clear path forward.
“The outlook for the business is completely different to how it was looking last year and earlier this year,” the source added.
Last month, AMP Capital lost six staff from CommIF to Plenary’s new infrastructure funds management business.
This followed the earlier appointment of former AMP Capital global head of social and aged care, Julie-Anne Mizzi, who previously oversaw CommIF, to lead Plenary’s new business across Australia and New Zealand.