The management fee on the £219m UK Mortgages Investment Trust will be cut as the trust aims to get to a position where the dividend yield is fully covered by the cash generated from the portfolio.
The fee is also being cut in recognition of the fact that it has taken "longer than expected" to fully invest the capital of the trust, the board said in a statement released to the stock market this morning (21 September).
UK Mortgages has a current yield of 6.4 per cent, and trades at a premium to net assets of 6.8 per cent. It is managed by the boutique bond firm TwentyFour Asset Management.
On a total return basis the trust has underperformed the AIC Debt sector in the two years since launch, returning 2 per cent since August 2015, compared with 15 per cent for the average trust in the sector.
The trust announced that, from the financial year starting 1 July 2017, the management fee on the trust will fall to 0.60 per cent of the net asset value or the market capitalisation, whichever is the lower.
The board of the trust said they expect the fee to revert to the previous level of 0.75 per cent within four years, as the yield becomes fully covered by the income generated.
The UK Mortgages Investment Trust invests in portfolios of loans secured against UK residential property.
david.thorpe@ft.com
