Electra cuts fees and commits to annual dividend

Until now, Electra Partners has received a management fee of 1.5% per year on the gross value of its investment portfolio, including cash. The board has decided to remove this fee, with effect from 1 April 2015. After this point, Electra Partners will receive a 1.5% fee on the gross value of its core investment portfolio; however, no management fee will be payable on cash, and the management fee on non-core listed and primary fund investments will be reduced to 1% per year.

If Electra had ceased charging this management fee for the year ending on 30 September 2014, the overall fee would have been reduced by £7m.

Electra's carry structure remains intact, with the GP receiving carried interest of 18% of net profits on direct investments, and 9% on primary fund investments, after reaching the 8% hurdle rate.

Outside of this review, the board has also agreed changes to Electra's primary fund investment strategy. Its listed investments and primary fund investments, which represent 8.5% of its investment portfolio, are no longer classed as part of its core portfolio. Furthermore, the firm will now reduce its primary fund investing to increase its focus on direct investments.

The board has announced Electra will now pay out an annual dividend to shareholders, set at 3% of NAV. Until now, the firm had not paid out dividends unless it was necessary in maintaining its investment trust status. Furthermore, Electra has not initiated any share buybacks since 2008.

The move brings Electra in line with the majority of other listed private equity funds, which do pay out dividends. This includes Dunedin, JZ Equity Partners, HgCapital Trust and SVG. To read our recent analysis on the importance of paying out regular dividends, click here.

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• Electra Partners LLP