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Robin Hood fund robs rich of fees

A new fund is setting out to prove you can do good while making money, David Potts writes.

Making money while helping a charity is the aim of a unique fund to list on the sharemarket.

Some of Australia’s best performing – and paid – fund managers will permanently waive their fees for a new listed investment company (LIC)  that will invest in shares.

It marks a turning point for financing philanthropy from the $200 million 10-year fund recently set up by James Packer with Crown Resorts and Westpac’s $100 million perpetual scholarship fund. Neither rewards investors.

Instead shareholders in the Future Generation Investment Fund will pay a 1 per cent annual feel-good fee that goes straight to a list of children’s charities.

In a good year – such as beating the ASX300 accumulation index (which counts dividends) fund manager fees can be as high as 20 per cent on top of the usual 0.8 to 1.50 per cent management charge.

Fund managers who normally charge  more than 1 per cent will give the difference back to shareholders.


 “I should call it the Robin Hood fund. It steals from the rich and gives to the poor plus some to investors,” says the fund’s founder Geoff Wilson, whose Wilson Asset Management is one of the best performers.

Investors should get a market-beating return over time after the 1 per cent fee for charity is deducted. One of the managers the new fund will use is LHC Capital, founded by Stephen Aboudwho managed the share portfolio of the Lowy family fortune for 12 years. Its Australia High Conviction Fund, one of the 14 funds in which Future Generation will invest including Wilson’s equity fund, returned 51.6 per cent before fees in the year to June 30.


This would have given ordinary investors a higher net return than the well-off who would be slugged with a 20 per cent performance fee.

“If you invested individually with these managers it would cost an average 1.3 per cent management fee and a 17 per cent performance fee. So investors will be getting the benefit of a 0.3 per cent fee rebate and no performance fee,” Wilson says.

The directors of the new fund will not be paid a salary. The ASX has also waived its listing fees.

During the past financial year, 11 of the 14 funds beat the sharemarket, which returned 17 per cent including dividends.

Most of the funds that Future Generation will invest in have either closed to ordinary investors, or were never available to them in the first place.

If the $200 million float is successful, $2 million a year will be pumped into charities such as Variety and Kids Helpline.

It would be a permanent source of funding for the charities because the assets of the LIC will grow over time, though the amount would vary each year.

How much each charity gets is put to a shareholders vote each year.

Since the fund will trade on the ASX capital gains are possible over time, although LICs can also trade for less than their value for long periods.

One of Australia’s most successful fund managers turned philanthropist Chris Cuffe has been running an unlisted managed fund supporting children’s charities for six years.

His Third Link Growth Fund has a minimum investment of $20,000 and a 1.4 per cent annual fee from which expenses are deducted and the remainder given to charity. Like Wilson, Cuffe does not charge a fee or take a salary.

It returned 18.4 per cent  during the past year, and has averaged an annual 12.8 per cent for three years.

There are critical differences between LICs and managed funds, though both offer diversification.

An LIC has a fixed amount of funds, apart from changes in the value of its investments, whereas a managed fund expands with new investors or contracts if there are redemptions.

In practice this means LICs can trade well under or over the value of their investments.

But a managed fund may have to invest new funds when stocks are expensive, dragging down everybody’s return,  or may even have to sell stocks at the bottom of the market if there are redemptions.

The Future Generation float for the $1.10 shares closes on September 3.

The prospectus is at