- Industry Disruption: Oxford Capital, known for its innovative history, unveils a groundbreaking fee structure for 2024 to enhance investor value.
- Transparency and Affordability: The new tariff addresses concerns in the venture capital (VC) and Enterprise Investment Scheme (EIS) markets, offering complete transparency and cost efficiency.
- Alignment with Investor Needs: Oxford Capital aims to align itself more closely with investors and portfolio companies, providing a cost-effective EIS solution.
Oxford Capital’s Bold Fee Structure Transformation
Oxford Capital, renowned for its track record of investing in innovative early-stage companies, has embarked on a transformative journey to revolutionize investment for 2024. With a history of pioneering solutions for commercial, technological, and scientific challenges, the company is taking a bold step to enhance investor value by introducing a unique fee structure.
A Commitment to Transparency and Affordability
Oxford Capital’s fee structure for 2024 reflects the company’s commitment to addressing long-standing concerns expressed by both Venture Capital (VC) and Enterprise Investment Scheme (EIS) investors across the market. The changes are designed to provide investors with transparency, cost efficiency, and an overall enhanced investment experience.
Key Features of the New Fee Structure
The changes introduced by Oxford Capital include:
- Complete Transparency: Investors are provided with a clear outline of the maximum lifetime cost from the outset, eliminating uncertainty.
- Tiered Initial Fee: A tiered initial fee structure ensures that investors subscribing a larger amount are not burdened with the same initial fee percentage as those subscribing a smaller amount.
- Streamlined Fees: The initial fee and custodian purchase/sale fees have been streamlined, eliminating the VAT requirement to reduce overall costs.
- Increased Subscription Percentage: Investors can now allocate a greater percentage of their subscription for investment, ranging from a minimum of 91.8% to a maximum of 95.8%, facilitating greater capital deployment.
- Optimized Cost Efficiency: The Annual Management Charge (AMC) has been significantly reduced and capped at 7 years to align with anticipated investment holding timelines.
- Elevated Performance Standards: The performance fee hurdle has been raised from 100% to 120%, calculated on a portfolio-wide basis.
A Comparative Example
To illustrate the impact of these changes, consider a £100,000 investment in January 2024. Under the previous fee structure (2023), the initial fee was 3% inclusive of VAT. In 2024, VAT is no longer chargeable on the initial fee, but the initial fee percentage has increased to 4%. However, this increase is offset by the removal of the VAT requirement.
Similarly, the custodian share purchase fee in 2023 was 0.24% inclusive of VAT, while in 2024, it is reduced to 0.20% without VAT. The AMC has seen a significant reduction from 2.5% p.a. inclusive of VAT to 1.50% p.a. inclusive of VAT, with a maximum cap of 7 years.
The introduction of a flat rate annual administration fee that covers all additional charges further enhances cost efficiency.
Maximum Lifetime Cost of Investment
Under the new fee structure, investors have clarity from the outset regarding the maximum lifetime cost of their investment. For example, for an investor paying the 5% initial fee, the maximum lifetime cost will be 15.7%. Those with a 1% initial fee will see a lifetime cost of 11.7%.
Performance Fee Hurdle
Oxford Capital has increased the performance fee hurdle from 100% to 120%, signifying a commitment to higher performance standards and aligning returns more closely with investors’ interests.
Mark Bower-Easton’s Insight
Mark Bower-Easton, Head of Distribution at Oxford Capital, provides insight into the motivation behind these changes: “The changes are aimed at disrupting the industry, and providing investors with fully transparent and cost-effective fees, which further align ourselves to our investors and our portfolio companies.”
He notes that these changes are in response to investor feedback, market research, and the Financial Conduct Authority’s (FCA) new Consumer Duty rules. The key issues addressed include fee transparency, certainty around lifetime costs, alignment between investors, VCs, and portfolio companies, and overall affordability.
In conclusion, Oxford Capital’s fee structure transformation for 2024 reflects a commitment to innovation, transparency, and affordability in the investment landscape, setting a new standard for investor value.
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