Invesco is embroiled in a row with one of its former funds, London-listed investment trust Invesco Perpetual Enhanced Income (IPE), after it refused the independent board's request to lower management fees.
Invesco announced in April that it was quitting as the investment manager of IPE, after the trust's independent board – headed by chairman Donald Adamson – requested that it push down the management fees it was creaming off from clients.
However the massive investment management firm is now using its position as IPE's largest shareholder to boot Adamson and non-executive director Richard Williams, both of whom called for negotiations on fees, off the board.
"Invesco has refused to negotiate," Adamson told City A.M. "We did have a good relationship – in my chairman's statement I acknowledged and thanked Invesco for the work they had done. We now feel very disappointed and shocked."
He added that the company was showing complete disregard for good corporate governance practice and was in breach of its own policy, which requires it to "respect the primacy of client interests".
Today, IPE announced that it had received promising proposals from four "household name" investment managers – all offering to manage the trust for fees much lower than the current 0.9 per cent of net asset value charged by Invesco.
They also were not proposing to charge a performance fee, which Invesco did.
The four offers which IPE's board has shortlisted for "further investigation" range from a firm with £11bn in UK assets under management proposing a fee of 0.35 per cent, to a firm with total global assets under management of $370bn pitching a fee of 0.65 per cent.
Adamson said the offers proved that Invesco's insistence on higher fees was out of line with the market.
Yet due to the Invesco requisition, IPE must now hold an extraordinary general meeting (EGM) by 22 July to allow shareholders to vote on whether to get rid of Adamson and Williams.
Invesco holds 16.8 per cent of the shares, and the majority of the other shareholders are inexperienced retail investors who may not vote or fully understand the implications of the vote.
Adamson said IPE is attempting to persuade Invesco to withdraw the requisition, which he believes is "ill-conceived". But if the EGM does end up going ahead, IPE would be doing everything possible to ensure the entire shareholder base is fully informed.
Brewin Dolphin, a wealth manager which owns around 2.5 per cent of IPE, said that it was "concerned" about the changes proposed by Invesco.
"We encouraged the board to seek a renegotiation and restructuring of the fees paid to Invesco Perpetual which are high and encourage excessive risk taking with client funds," said Brewin's Guy Foster.
We can find no justification for Invesco’s decision to abandon those negotiations, and subsequently use its status as the largest aggregate holder of shares (on behalf of its clients) to seek the removal of two of the directors.
"We cannot support the removal of board members under such circumstances and would urge parties to return to good faith negotiations or otherwise leave the board to continue working to reduce fees and shore up the uncovered distribution for the benefit of shareholders.”
Asset managers have been under increasing pressure to lower their fees recently, as increased scrutiny from the Financial Conduct Authority, regulation in the form of Mifid II and the rise of cheaper passive funds has squeezed them.