Henderson High Income Trust (HHI) has announced a reduction in its management fee, effective from 1 January 2025. The trust’s board and manager have agreed to revise the existing fee structure in a move that should be welcomed by shareholders.

Under the new terms, HHI will pay a flat management fee of 0.45% per annum of average adjusted gross assets. This replaces the current tiered arrangement, under which Janus Henderson Investors received 0.5% on the first £325m of assets and 0.45% on assets above that threshold.

While the trust currently manages assets below the £325m mark (gross assets stood at £273m as at 29 February 2024), the simplification of the fee structure brings clarity and should lead to modest cost savings for its shareholders.

[QD comment MR: We think that shareholders will welcome the fee reduction, especially in the current environment where investors are increasingly fee-conscious. Even small reductions in costs can translate into meaningful long-term benefits for shareholders, particularly in income-focused mandates like HHI. However, we would have liked to have seen terms that also allowed for the fee to be based on net assets, rather than gross assets, and also on the lower of net assets or market cap. These terms are now considered to be best practice and, with HHI currently trading at around an 8% discount to NAV, this feels like a bit of a missed opportunity.

HHI has recently been repurchasing shares but it’s not unreasonable to think that if interest rates fall, its shares could benefit from renewed demand and it could return to trading at a premium rating and could once again be issuing stock. If HHI were to be able to achieve significant growth, we would like to see some of the benefits of additional scale passed on to shareholders and would note that the new structure doesn’t allow for this.]