Babcock & Brown will take steps to augment the independence of the boards of directors of its satellite funds and alter the base and incentive fees it receives from them, starting with Babcock & Brown Infrastructure and Babcock Brown Power.
The Australian specialist fund manager said in a statement that such changes, once negotiated with the boards of the funds, will be delivered through amendments to the funds’ individual management agreements and will be subject to shareholder approval.
Among other steps, Babcock & Brown Infrastructure, the first fund to disclose the details of how it will enact the proposed changes, said that two independent directors will be added to its company board, which currently consists of two independent and two non-independent directors.
Babcock & Brown also will split the base fee it receives from the fund into a CPI-adjusted flat fee component of $1 million per year and a tiered management fee that gives it. One percent for market capitalisation of A$400 million, one percent for market capitalisation greater than A$400 million and less than A$2 billion, and 0.75 percent exceeding A$2 billion.
Additionally, Babcock & Brown will forego receiving incentive fees from the fund until its share price stabilises at $1 per share or three years have passed from the enactment of the change.
Babcock & Brown said that similar changes, meant to minimise perceived conflicts of interests and align incentives for the funds and the manager, will be discussed with the independent directors of its other satellite funds.
The governance and fee changes are the latest element of Babcock & Brown’s ongoing strategic review process, announced in August, meant to turn around the firm’s performance after the value of its shares plummeted nearly 90 percent in the first eight months of the year.
The strategic review has already resulted in a decision to wind down its corporate and structured finance division, sell its management agreement and ownership stake in satellite fund Babcock & Brown Communities and key personnel changes, including the resignation of the firm’s former chief executive officer, Phil Green.