Cordiant Digital removes 10% fee reinvestment rule
Cordiant Digital Infrastructure Limited (CORD) has tweaked its Investment Management Agreement by scrapping the rule that forced its manager, Cordiant Capital Inc, to reinvest 10% of its annual fee back into CORD shares. The change comes with a new promise: Cordiant Capital and Mr Marshall will keep their combined holding at least as high as what the old rule would have required over time.
On the face of it, this removes a predictable stream of buying in the market. But the company points to existing alignment – the manager and team already own 2.01% of CORD – and a fee structure that flexes with market value and NAV, with no floor. Let’s unpack what changed and why it matters.
What changed in the Investment Management Agreement
Under the previous Reinvestment Requirement, after every interim and annual report the manager had to spend 10% of the preceding six months’ fee on CORD shares. If the recent average share price was above the last reported NAV per share, those shares were subscribed as new shares; otherwise, they were bought in the market. Shares bought under this rule were locked up for 12 months.
That obligation has now been removed. The board says this reflects two things: the manager’s already high ownership and that fees are based on the lower of market capitalisation or net asset value (NAV), with no floor – so the manager’s revenues fall when the company’s value falls.
To offset concerns about alignment, Cordiant Capital and Mr Marshall have committed that their aggregate holding will never be lower than the minimum that would have been required under the old IMA. In plain English: they will not let their combined stake dip below the level that the 10% rule would have made them hold.
How the fee structure works at CORD
The annual management fee is calculated on the lower of CORD’s market cap or its NAV. For the year ended 31 March 2025, CORD paid aggregate fees of £6.1 million, which equated to 0.6% of the average of the opening and closing NAV across that financial year.
There is also a disclosed fee schedule for the market cap basis:
- 1.00% of average market cap up to £500 million
- 0.90% between £500 million and £1 billion
- 0.80% above £1 billion
Importantly, the fee is based on the lower of market cap or NAV with no floor. That creates some downside linkage for the manager if CORD’s value falls, which supports the board’s argument about alignment even without a mandated reinvestment rule.
Insider ownership and alignment signal
Since IPO, 2,394,292 shares have been purchased by the manager’s affiliate (CDIM) under the reinvestment rule, and none have been sold. Today, Cordiant Capital and the Digital Infrastructure team own 15,393,552 shares in aggregate, representing 2.01% of the issued share capital. Mr Marshall personally holds 13,265,578 shares.
The new commitment is noteworthy: Cordiant Capital and Mr Marshall will ensure their combined holding never falls below what the old rule would have dictated. The quantum of that “minimum” is not disclosed and will shift over time, but the intent is clear – maintain at least the same baseline level of skin in the game.
Why this matters for CORD shareholders
- Alignment optics: Removing a hard-wired reinvestment rule can look like a step back. The counter is the sizeable existing stake, the no-floor fee linkage, and a formal commitment not to dip below the old requirement’s implied holding.
- Market technicals: The 10% reinvestment created a steady, price-insensitive buyer after each report. Without it, that marginal source of demand goes away. In periods of weak liquidity, that could matter for the share price.
- Capital discipline: Under the old rule, if the shares traded above NAV, the manager would subscribe new shares (slightly dilutive, but at a premium to NAV). The removal tidies up that mechanic. Future buying by the manager becomes discretionary rather than formulaic.
- Cash flow to the manager: For context, 10% of last year’s £6.1 million fee is £0.61 million. Previously, that slice had to be reinvested into shares with a 12-month lock-up. Now, there is no such obligation. No new lock-up arrangements are disclosed.
- Governance tone: The change was agreed by the board and framed as recognising “strong existing alignment”. The safeguard commitment is helpful, though investors will want to see it honoured over time.
Key numbers from the RNS
| Annual management fee paid (FY to 31 March 2025) | £6.1 million |
| Fee as % of average NAV (FY 2025) | 0.6% |
| Reinvestment requirement | Removed (previously 10% of fee reinvested after each report) |
| Shares bought under old rule since IPO | 2,394,292 (none sold) |
| Aggregate manager and team holding | 15,393,552 shares (2.01% of issued share capital) |
| Mr Marshall’s personal holding | 13,265,578 shares |
| Lock-up on shares purchased under old rule | 12 months |
| Fee basis | Lower of market cap or NAV, with no floor |
| Market cap fee schedule | 1.00% up to £500m, 0.90% £500m–£1bn, 0.80% above £1bn |
Positives and negatives at a glance
What looks positive
- Clear alignment: 2.01% ownership and a pledge not to drop below the old rule’s implied minimum.
- Fee sensitivity: Using the lower of market cap or NAV, with no floor, ties the manager’s income to shareholder outcomes.
- Governance clarity: Removes a somewhat mechanical process of forced buying or new share subscriptions at premium levels.
What could be negative
- Less automatic demand: The steady 10% fee-driven buying goes away, which could reduce technical support for the share price.
- Perception risk: Some may view the change as easing “skin in the game”, even with the minimum-holding commitment.
- Lock-up nuance: The 12-month lock-up applied to shares purchased under the old rule. No new lock-up terms are disclosed for any future discretionary purchases.
What I am watching next
- Holdings disclosures: Do Cordiant Capital and Mr Marshall maintain or increase their stake consistent with the new commitment?
- Interim and annual reports: Any commentary on governance, fee outcomes and alignment following the change.
- Trading dynamics: Any noticeable impact on liquidity or discount/premium to NAV after the removal of the mechanical buying.
Bottom line
This is a tidy governance tweak with modest real-world effects. The removal of the 10% reinvestment rule trims a small but steady source of buying, which is a slight negative for market technicals. Against that, insider ownership is meaningful, fees flex with value and there is a clear commitment to maintain at least the prior minimum holding.
On balance, I view it as neutral overall, with the onus now on the manager to show through time – and through the register – that alignment remains more than just words.
