Investment trust industry stands firm

Jeff Prestridge

Jeff Prestridge

Although I am somewhat reluctant to admit it, I have been writing about investment trusts for the best part of 30 years – through the good and bad times.

There have been plenty of bad times along the way: the 1987 stock market crash; the bursting of the 2000 dotcom bubble; and the awful split capital investment trust scandal that ensued.

A debacle that prompted the regulator at the time – the inept Financial Services Authority – to describe it as the worst episode of misconduct it had ever seen.

Yet the investment trust industry has come through it all intact.

A few names associated with the industry have disappeared along the way – the likes of Ivory & Sime, Edinburgh Fund Managers and the once mighty Globe Investment Trust.

As have a few characters – none bigger or more industry changing than the dynamic Philip Chappell, former mercurial adviser to the Association of Investment Trust Companies, who died 15 years ago at the tender age of 63. It was Mr Chappell who forced the AITC to become more consumer facing.

But today, the sector is probably in the rudest of good health that it has been for many a year.

Of course, strong stock markets have helped but its renaissance is more to do with consumer focus (the Chappell legacy) than anything else.

It has realised to survive and compete in a crowded investment funds market, it must put consumers first. It is a message preached on high by the Association of Investment Companies (AITC as was) and one that has filtered down to individual boards.

Charge trends are emerging

For the first time since I have been reporting on the sector, boardrooms are now flexing their muscles. They are no longer allowing the managers to dictate terms.

They are doing what they are employed to do – which is to stand up for the rights of shareholders. They are earning their fees. Boardroom bicep flexing is manifesting itself in two ways.

First, more boards are now sacking poor performing investment managers – and then putting the management contract out to tender.

It is often a tool of last resort but the fact that boards are now employing it should be welcomed. Woeful investment management should not be tolerated.

Secondly, and probably more importantly as far as investors are concerned, boards are now demanding a better deal on charges from their managers. Reductions are the order of the day.

I recently asked the AIC for details of the trusts where charges had been reduced.

The list that followed nearly blocked my email account. It went on and on – longer than a Kim Kardashian shopping list. Aberdeen Japan, Artemis Alpha, Value & Income, Fidelity European Values, Monks, Allianz Technology, Henderson High Income et al.