Kayne Anderson MLP (NYSE:KYN) filed a preliminary proxy statement yesterday detailing that the board will ask shareholders to approve a new investment advisory agreement that will eliminate the performance adjustment to Kayne Anderson's management fee. They will probably get this approved by shareholders without too much difficulty.
I'm surprised that the board decided that the performance adjustment is not beneficial to shareholders. As I've written before, I like it when closed-end funds have performance fees, because it gives the adviser an extra incentive to provide shareholders with above average returns.
The way closed-end funds are structured, managers with traditional fee arrangements receive roughly the same dollar amount of fees every year regardless of whether the fund was an above average performer or below average. Because of this, some fund managers may view closed-end funds as a way to get a reliable stream of management fees without having to add value for the funds' investors. I'm not saying that this is how Kayne Anderson views their CEFs, but I would rather see a trend of funds adopting performance adjusted fees rather than dropping them.
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