Hargreaves Lansdown has dropped Investec's Enhanced Natural Resources fund from its Wealth 150 list of recommended funds, citing an expensive performance fee as the main reason.

Ben Yearsley, investment manager at Hargreaves Lansdown, said, ‘In our opinion, the fund is managed by a talented team with a sound investment approach and the performance to date has been admirable.’

He added, ‘However, the fund also carries a performance fee. The performance fee is 20 per cent of any outperformance of one month GBP Libor (London Interbank Offered Rate) plus 4 per cent.’

Yearsley explained that the fee had little impact on the fund’s overall performance initially as Investec offers an institutional class of this fund, which is not available to retail investors, without a performance fee.

Up until September 2010 the performances of the two classes was almost identical.

‘However, over the last 12 months the performance has started to diverge. At this stage the difference is small but we feel the performance fee could become a greater drag on returns in future,’ he added.

Yearsley emphasises that the company is not suggesting investors sell the fund but that it no longer feels comfortable suggesting the fund for further new investment.

Alongside traditional investment strategies, fund managers Bradley George and George Cheevely use shorting to achieve the fund’s objective.

This means borrowing shares that it is believed will fall in value and then selling them in the hope that the share price will have dropped by the time the lender needs to be repaid.