Complaint Filed Against ING Investments Alleging Excessive Management Fees
Thursday, October 10, 2013

On August 30, 2013, a shareholder of the ING Global Real Estate Fund filed a derivative action against ING Investments, LLC, investment adviser to the fund, in the U.S. District Court for the District of Delaware alleging that ING breached its fiduciary duty under Section 36(b) of the 1940 Act by charging an investment management fee so disproportionately large that it bore no reasonable relationship to the services rendered and could not have been the product of arm’s-length bargaining. The plaintiff alleges that the nature and quality of the services provided to the fund did not justify the fee paid to ING because ING delegated “substantially all” of its investment management responsibilities to CBRE Clarion Securities LLC, the sub-adviser, while paying CBRE “just a fraction” of the total fee charged to the fund (allegedly $12.1 million out of $27.6 million in fiscal year 2012).

The plaintiff also alleges that economies of scale enjoyed by ING in connection with the provision of investment management services were not passed on to the fund as required by Section 36(b). To support this allegation, the plaintiff cites ING’s failure to implement additional fee breakpoints despite the fact that the fund reached its final breakpoint of $500 million in October 2006 and, as of April 30, 2013, had net assets of approximately $5.4 billion. The plaintiff notes that CBRE’s breakpoint schedule includes a final breakpoint at $750 million and claims that ING used the disparity with its breakpoint schedule to benefit itself rather than the fund. Finally, the plaintiff asserts that no “truly independent board acting conscientiously” with adequate information would have tolerated ING’s fees, alleging that the fund’s trustees violated their fiduciary duty to the fund and its shareholders by rubber-stamping the investment management agreement. The plaintiff seeks actual damages resulting from the excessive fees or, alternatively, rescission of the investment management agreement and restitution of all excessive fees paid pursuant thereto.

 

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