NextEnergy Solar Fund Ltd (LSE:NESF) said it has cut the fees it pays to its investment manager in a move aimed at improving returns for shareholders and addressing concerns about the fund’s persistent discount to net asset value.
From the start of April, the annual investment management fee will be calculated using an average of the fund’s share price and its net asset value, rather than being based solely on net asset value as before.
Based on market prices at the time the change took effect, this would equate to a reduction in fees of around 13%, or roughly £600,000 a year.
Under the revised structure, the fee bands remain the same, ranging from 1% for the first £200 million of assets, down to 0.8% for amounts above £300 million, but will now be applied to a blended measure that gives equal weight to market capitalisation and net asset value.
The total charge will also be capped at the lower of the new and old fee arrangements, providing an extra layer of protection for shareholders.
The fee cut follows an earlier update this month and comes as the board explores a broader set of options to close the discount at which the fund’s shares have been trading.
Like other listed renewable energy funds, NESF has struggled with a weak share price, despite stable underlying asset values.
The company’s shares have traded at an average discount of more than 10% to net asset value over the past year, triggering a clause in its articles of association that requires a vote on the fund’s future at the next annual meeting.
This “discontinuation resolution” will be one of the items of business at the AGM, scheduled for later in August.
The board said it would consult major shareholders before putting forward any firm proposals and that details would be set out in the AGM circular in due course.