Dennise Williams, Staff Reporter
THIS IS the view: Executives of Capital & Credit Fund Managers (CCFM) say the cut in the management fee structure of their Giltedge Fund is a 'win-win situation.'
The new management fee, effective December 15, will be 1.5 per cent charged over a 12-month period. And a preliminary fee of 3 per cent is only charged if the unit holder encashes before 30 days.
Coming from a high of 9 per cent, CCFM has agreed to give up between 5 to 8 per cent of the Giltedge management fee it formerly commanded.
PRELIMINARY SELLING FEE
Curtis Martin, CCFM director, explained that previously, CCFM charged 8 per cent as a preliminary selling fee, plus a fee of 1 per cent management fee prorated over a 12-month period.
He explains it this way, "Previously, for every $1 million, we would get a management fee of $90,000. Now we will get $15,000 per year on that same $1 million as long as the investor does not encash before 30 days."
The changes were made on December 15 at the Jamaica Promotion Corporation building in New Kingston, as announced in a notification of the meeting sent out to unit holders dated November 18.
Mr. Martin told Wednesday Business that 98 per cent of attendees voted in favour of the changes.
But this change is not a gift to unit holders - CCFM's hand was forced.
COMPETITIVE DISADVANTAGE
Mr. Martin explained, "The previous management fee was a competitive disadvantage. Other unit trust operators were telling their clients that CCFM's Giltedge has a higher management fee than others in the market. This discouraged investors."
However, for the other two funds CCFM offers, Mr. Martin says, "Our management fee for the Income & Growth and Capital Growth funds are similar to current market conditions so we won't be changing."
And so, with a lower management fee for the Giltedge fund, Mr. Martin says, "This will force us to increase the volume of sales to make up for the loss."
However, that might be a challenge in the current environment. While the Giltedge fund, backed by real estate holdings and fixed income securities, has not experienced the ravages of the stock market, the entire market is a challenging one right now.
Investors, burned by losses on the stock market, have made sales of financial products a hard one.
Several brokers tell Wednesday Business that clients have stopped taking calls in reaction to the poor performance of the stock market and even the money market in light of inflationary pressure.
However, Mr. Martin is confident that his company has performed well as they offer three funds for different risk appetites.
"At December 19th, the Jamaica Stock Exchange lost nine per cent year to date. And while our Income & Growth fund (blue chip stocks and fixed income securities) has lost 12 per cent year to date, our Capital Growth fund (stocks, real estate and fixed income securities) has only lost 2.8 per cent, year to date. However, our Giltedge fund has actually gained 13.14 per cent over the last 12 months."
And to the detractors who say that money managers should have done better over the year, he states, "When you go into equities you can't look at one year's performance. Professional money management is about finding sound companies that will do well over the long term."
SPECTACULAR PERFORMANCE
And he adds, "Look at any unit trust. None have done well this year, but over the last two to five years, they have done spectacularly."
Beyond the fee structure, CCFM has also changed the paper certificate form to an electronic system with records held at the Jamaica Central Securities Depository.
Capital & Credit Financial Group and Capital & Credit Merchant Bank acquired CCFM, formerly the Jamaica Unit Trust in October 2004.
