Thames Ventures VCT 1 and 2, currently managed by Foresight, are proposing to merge and rename the merged company as Foresight Ventures VCT. I currently hold TV1 as a result of past holdings in Pennine AIM VCT, Pennine Downing AIM VCT, Downing One VCT, et al. These companies are a typical example of unsuccessful VCTs merging, renaming, and resetting performance fees when they failed to meet targets. It’s no different in this case.
Merging of small VCTs is usually justifiable so I won’t be voting against that. But I have voted against the proposed performance incentive agreement. Performance fees are rarely justifiable in any investment trust and certainly not in this case. The management fees are already too high and with a base fee of 2.0% of NAV per annum if the investments are made successfully then the manager gets a return from the increase in the base fee. I do of course object to resetting of the existing performance fees just because they are under-water.
There is very little evidence that performance fees actually improve the performance of trust management.
Another negative aspect of the proposals is that the Investment Services Agreement with Foresight is being changed to remove the ability of the board to interfere in investment decisions. In successful VCTs the management decisions on new investments are carefully reviewed by the board of directors and have the final say on them. Unfortunately we have not been given a vote on that issue.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )