Aluma Infrastructure Fund Revises Fee Model and Seeks Extension of Management Agreement
The Aluma Infrastructure Fund is planning to revise its compensation model as part of updating and extending its management agreement, which is set to expire in November. The fund aims to implement a simpler and more transparent fee structure linked directly to the fund's performance and shareholder value creation. Under the new model, management fees will continue to be calculated as a percentage of assets under management, but accounting revaluations of the fund’s assets will be excluded from the fee base. This means that increases in asset values on paper will no longer inflate management fees, which cover operational costs and executive salaries.
Additionally, the fund intends to tie variable compensation components to actual fund performance, such as Aluma’s stock price and profits from asset disposals. It is also considering introducing equity-based incentives for management company employees. Currently, there is no connection between the fund’s share performance and management compensation. Another key change is the elimination of the mechanism that distributes management fees received from portfolio companies to the management firm; instead, all fees will be paid directly to the fund.
Aluma invests in companies within the communications, energy, and environmental sectors, generating returns through capital appreciation and income streams like management fees, interest, and dividends. The fund measures investment performance based on fair value. The management company currently receives annual fees ranging from 1% to 1.5% of assets under management, including cash and equivalents, plus VAT, and is also entitled to an annual bonus.
Alongside the fee model changes, Aluma plans to pay its first dividend and initiate a share buyback program. The fund, managed by Yair Hirsch, has a market capitalization of 305 million shekels after a 13.3% stock price increase this year. Aluma was first listed five years ago. Separately, another infrastructure fund, Keystone, recently announced its conversion to a regular public company.
