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09:09
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Originally posted by g41
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I am not bagging Glennon who should be admired for opportunistically taking advantage of CMI for their own advantage. I am merely pointing out the management agreement is excessively to Glennon's advantage. I disagree with you regarding the fact that they won't make much unless they perform. The Benchmark for the performance fee to be paid to them is RBA cash rate plus 2% for what is an ASX listed equities mandate. The average return for the All Ords accumulation index for any decent length of time (say since 1900) is around 11% p.a. The average cash rate for the same period is around 4%. The difference is very close to the generally accepted theoretical equity risk premium (CAPM definition) of about 6%p.a. Thus simplistically they can invest in ASX listed equities, underperform the average benchmark by 4% p.a. and still expect to have a 50% chance of receiving a performance fee. The fact that such a one sided management agreement was entered into indicates that Glennon were appointed not because CMI ran a competitive tender (an example of an LIC management agreement entered into after a competitive tender was one entered into by CYA a few years ago - management fee close to 0.10% p.a., no performance fee, no fixed term) but because of some kind of relationship between Glennon and those controlling CMI
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The company pays nearly $2M a year in occupancy costs , would they be better to say spend some of their kitty of $30M on a warehouse for themselves no need for a fund or manager then ?
(20min delay)