Investors to get opportunity to invest alongside one of the greats

The $17 million minnow Wentworth Holdings (ASX: WWM) is progressing towards its transformation into an investment vehicle backed by Mr Alex Waislitz’s Thorney Investment Group with the recent signing of an Implementation Deed.

As Thorney is a private company, there is little publicly available information about its investment track record, however according to an interview published in the book Masters of the Market, between 1991 and 2003 Thorney reportedly produced investment returns of “at least 20 per cent each year.”

As part of the proposal in relation to Wentworth a capital raising of $50 million will be undertaken and Thorney will be appointed investment manager with Mr Waislitz appointed Executive Chairman and Chief Investment Officer. Commenting on the proposal Mr Waislitz said: “After more than 20 years investing in a purely private capacity, I am excited by the opportunity of providing public access to the skills and experience of the Thorney team and pursuing absolute returns for shareholder’s over the medium to long term.”

Like a number of other externally managed companies, it is important for shareholders to be aware of the fees charged by the investment manager. For example, shareholders in Platinum Capital (ASX: PMC) are charged a management fee of 1.5% per annum plus a 10% performance fee when returns exceed the benchmark plus 5%. In the case of Thorney’s arrangement with Wentworth the proposed management agreement involves an initial term of 10 years plus a seven-year option, a base fee of 1.5% on gross assets and a performance fee calculated as 20% of the increase in net assets for the financial year after deducting the base fee.

Unlike Platinum Capital’s structure, which adjusts the performance fee for any underperformance, there would not appear to be any high water mark requirement for Thorney as suggested by the statement that “no shortfall is relevant for the calculation of performance fees for subsequent financial years.”

Foolish takeaway

As Warren Buffett has said time and time again, quality management is a key ingredient in investment success. Following successful businesses people into new ventures can on many occasions work well for investors, however as the proposed fee structure for Thorney shows, the terms are rarely as good for the general investing public.

Looking to improve your investing edge? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.