So the incentive fees are by far the biggest leak of value for IFT holders.
There are a few important things to understand, there are different types of fees by geography (NZ vs international) and within international there are a further three categories - initial, annual and realised incentive fees.
NZ Portfolio Management Fee
NZ only investments attract a fee based on the market cap or independant valuation that change with their valuation e.g. 1.125% from $0-50m, 1.00% $50m-150m, 0.8% when greater than $150m.
International Portfolio Management Fee
This fee is paid at 1.50% the cost price of any non-Australiasian asset, inclusive of the book value of any debt in those wholly owned assets.
International Portfolio Incentive Fee
This is the one with three categories - Initial, annual and realised. Each of these fees are subject to a minimum hurdle of 12% p.a. after tax.
Initial - First these assets must be held for three consecutive years and the fee is payable at 20% outperformance against the benchmark 12% p.a. after tax.
Annual - The same terms as "initial" but is paybale over three tranches (one tranche per year). The second and third tranches is only payable however, if the valuation of the business is still greater than fair value after which the first valuation was conducted. So in otherwords, if the valuation falls backwards in the second or third year, the fee is no longer payable.
Realised - These are the fees that are payable on the realised gains from a sale e.g. Tilt Renewables and possibly RetireAus if it goes in the near term. Again must be 20% outperformance against the 12% benchmark after tax.
So to answer your question, yes absolutely these fees are high. On the contrary, what other infrastructure company generates 18.7% returns p.a over the past 28 years?
The ACC (accident compensation corporation - 7th largest shareholder) are very vocal about this and have recently been taking votes to the AGM to change it, however, to no avail.
I guess for me it comes down to the overall performance. I couldn't be anything else but happy with an 18.7% return p.a of Infratil. The fees are what they are, I'm happy to pay for performance. In saying that, I always do vote in favour of the ACC's vote at any AGM where applicable, but it's not the end of the world. It's also crucial to consider the opportunities that come with being run my Morrison and Co. Technically, being the asset managers they are, IFT gains access to more opporunties than a regular listed company would. IFT gets the benefit of both - we can tap into that knowledge and those opportunities, Gurin and Galileo are two examples of this.
Just my thoughts.
Dalto24
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