Devon Funds Management has revamped performance fees and benchmarks for three key products, dropping absolute return targets for two strategies in favour of index hurdle rates.
The changes, which came into force in September, have seen the Devon Australian and Trans-Tasman funds adopt respective performance fee benchmarks of the S&P ASX200 and a blended Australia/NZ market index instead of the previous annual return targets of 10 per cent and 9.85 per cent.
Greg Smith, Devon head of retail, said the fee and benchmark updates “better reflect the style of these funds” and come following “an extensive review” of the manager’s product suite.
“The performance fee models will remain subject to a high water mark, which ensures that clients will not pay for the same performance twice, and we will not be charging a performance fee for negative returns,” Smith said.
“We’ve also taken the opportunity to impose a performance fee cap of 3 per cent on the Devon Alpha Fund. The Devon Alpha Fund is the strongest performing fund amongst the Trans-Tasman equity managers in the Morningstar performance tables over 12 months, and has enjoyed some strong inflows over the same period as well.”
The Devon Alpha fund benchmark has also changed to the official cash rate (OCR) plus 5 per cent. Previously, the Alpha strategy used the simple OCR as a performance target.
Smith said the manager reviews its product disclosure statements (PDS) annually and makes “changes where necessary”.
“This year, we’ve made changes to the ESG wording in our PDS to better reflect our capabilities in this space and what we do with particular reference to the Devon Sustainability Fund,” he said. “We’ve also highlighted our membership of Responsible Investment Association of Australasia and the UN supported Principles for Responsible Investment (PRI) and what this means.”
The Financial Markets Authority has recently targeted performance fees, investment benchmarks and ESG claims as part of its value-for-money and anti-greenwashing campaigns.