Kames Capital, the UK-based asset management arm of AEGON, is to waive the performance fee on its UK Equity Absolute Return Fund to continue attracting investor interest into the portfolio.

The fee payable when the fund beats its benchmark of the Bank of England base rate, from April to 31 December 2012, will not apply. Kames Capital oversees £49 billion (around $79 billion) of client money. The performance fee is currently 20 per cent of the fund's outperformance above the BoE rate hurdle. It will fall to 10 per cent of the outperformance from 1 January next year.

The firm says it aims to build on the “momentum” of the £65 million fund since its launch in February 2010. It says the fund is ranked first quartile over one year, returning 4.71 per cent against the median for its sector of 0.52 per cent.

The fund is market neutral and uncorrelated to the UK equity market, aiming to deliver a positive absolute return over a 12 month period in all market conditions.

Fund companies have taken different approaches to performance fees in recent years, in some cases scrapping them entirely, or cutting annual fees and only charging for performance instead. Earlier this week, the Axiom Fund, managed by Geneva-based Palaedino Asset Management, waived its management fees and said it will only charge for performance, claiming to be the first fund of funds in the UCITS space to make this switch.