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Blue Capital plans to cut target return

Reinsurance firm Blue Capital is to cut its target return by two percentage points.

And the levels for a performance fee paid to the investment manager will also be changed — with the performance trigger reduced by two percentage points to eight per cent.

And the performance hurdle will go up from three per cent to five per cent — which means the performance fee will only be paid on profits over a higher threshold than is currently in place.

A statement from the company said: “To better reflect the long-term market conditions, the company believes that, with effect on and from January 1, 2015, it is appropriate to change its target net return from Libor (the London Interbank Offered Rate) plus 10 per cent per annum to Libor plus 8 per cent per annum, to be achieved over the longer term.

“For the avoidance of doubt, the company's distribution target remains unchanged, being an annualised dividend yield of Libor plus 6 per cent per annum on the original issue price of its ordinary shares in December 2012.”

The statement added: “In connection with the revised target return and the adoption of the revised investment policy, the board believes that, in light of long-term market expectations, the investment manager will be more appropriately incentivised and more closely aligned with the company's interests if the performance trigger is reduced from Libor plus 10 per cent to Libor plus 8 per cent, meaning that annual performance has to meet the lower revised target return for a performance fee to be paid.”

Blue Capital will also revise its investment policy relating to the classes of reinsurance in which the master fund can invest.

The revision will also give the master fund “more flexibility to pursue exposure to particular zones — specific occurrences of particular perils in specific geographic regions”.

The revised investment policy requires the approval of shareholders, although the modified performance fee does not.

But the firm said that it would seek the approval of shareholders these changes as it represents “sound corporate governance.”

Montpelier Re, an affiliate of the investment manager, and the holder of around 25 per cent of the company's ordinary shares, has agreed to abstain from voting in relation to the modified performance fees.

The revised target return does not need shareholder approval and will be adopted from January 1 next year.

A meeting to vote on the proposals will be held on Monday, December 21.

Adjusting to the market: Blue Capital plans to lower its target return and must get the apporval of shareholders

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Published December 09, 2015 at 8:00 am (Updated December 08, 2015 at 11:41 pm)

Blue Capital plans to cut target return

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