The People’s Trust reveals managers who will get seven-year contracts to pick the best long-term investments
‘Of the people, for the people, by the people’ is the kind of soundbite exhausted by politicians over the years, but it is a philosophy that The People’s Trust reckons it can bring to investors.
The new investment trust is the brainchild of former Investment Association boss Daniel Godfrey, who left the UK fund management trade body back in 2015 when its biggest members objected to his plans to push forward consumer friendly initiatives, such as disclosing cost and charges.
Now he wants to disrupt the investment arena with the launch of the People’s Trust, which he said will offer the public a way to invest over a long period of time without conflicts of interest that he believes blight fund management.
And the trust has now revealed the fund managers chosen to help with that mission.
Daniel Godfrey said that The People’s Trust is being launched with a clear purpose: better returns for investors and a better impact on society
The multi-manager investment trust will targets an average 7 per cent annual return over a seven-year period through investment across domestic and international shares and assets.
Mr Godfrey hopes that enough people will buy into his concept of a better wy of investing, to see the trust raise £125million in its initial public offering that’s expected in autumn.
Teams from Artemis Investment Management, Comgest, First State Investments, JO Hambro Capital Management and Lansdowne Partners have been named as managers who will be enlisted by the trust to run bespoke, equally-weighted portfolios.
Each will take on a specialist area, with named lead managers. The areas covered include UK Smaller Companies, European, Asia including Japan and Global, while a Clean Energy sector has also been identified as worthy of inclusion.
Managers will be expected to pick a tight list of companies within each sector that they believe will deliver the best long-term performance.
Interestingly, the People’s Trust has taken the uncommon step of awarding those responsible for managing its capital with long seven-year contracts.
Usually, investment trust boards offer shorter contracts to maintain flexibility to sack managers for poor performance.
Mr Godfrey argues that fund managers require this freedom to fully implement their investment strategy, allowing them to avoid the pressure of abandoning a focus on business fundamentals to profit from short term bumper performance that keeps their numbers up.
He added: ‘If you are willing to swap short termism and for a long investment horizon and are willing to fasten your seat belt when things get rough, we should be able to deliver a good return without the need to take higher risks.’
THE PEOPLE’S TRUST MANAGERS
Investment Manager Strategy Lead Managers Artemis Investment Management UK Smaller Companies Mark Niznik & William Tamworth Comgest Pan-European Arnaud Cosserat Franz Weis Alistair Wittet & Sébastien Thévoux-Chabuel First State Investments Asia-Pacific including Japan First State Stewart Asia Investment Team led by Martin Lau Richard Jones Vinay Agarwal & Alistair Thompson J O Hambro Capital Management Global Ben Leyland & Robert Lancastle Lansdowne Partners Clean Energy Per Lekander
Of course whether the trust is able to meet its aimed for return aim will also depend on market conditions, but Mr Godfrey said it will be accountable to its investors if things fall short.
If the fund’s performance fails to meet objectives, shareholders will be written to with an explanation as to why.
They will then get to vote on whether to remove the boss himself if the target has not been met at the end of the seven year period.
Managers will get paid a fee for their service and not receive a performance bonus.
Mr Godfrey said: ‘I don’t understand why a fund manager should be rewarded further than their initial salary for doing their job.
‘My general feeling is that a performance fee allows asset managers to offer investors a low sticker price. However, investors are likely to end up spending more money in the long run.’
People power: Founder Daniel Godfrey believes his new investment trust can offer a different way to invest
One of the more notable quirks of the investment trust is almost a fifth of the money will be allocated to clean energy investments.
What is more, it aims to make a social impact through investment in social enterprises and charities dealing with some of the most difficult issues of deprivation in the UK.
For example, an initial one per cent of the fund’s assets will be invested in a portfolio of social impact investments managed by the social investment arm of The Big Issue Group. The figure could rise to 5 per cent, Mr Godfrey said.
The sum will not be a charitable donation, but an investment into projects that should generate social impact as well as modest, steady financial returns, he added.
In addition, the fund also holds true to the ‘of the people’ part of the mantra as the costs associated with the launch have been footed by some 2,335 investors who crowdfunded the People’s Trust launch.
It’s initial funding target of £100,000 has been exceeded by £16,000. Any surplus cash after launch will be injected into the Trust.
Adults are still able to pledge a minimum of £20 or £10 for those under the age of 35, to join the growing list of ‘founders’ until the end of July.
Founders will be offered a small discount at launch.
The annual report will provide a comprehensive cost breakdown to allow investors to identify exact costs of things like the audit processes and fees paid to third party organisations to safeguard the fund’s assets known as the custodial levy.
It will also provide a ball park figures of the likely costs the fund is likely to incur over the following year.
One cost that will remain shielded from the public eye is how much is paid to each fund manager so as not to diminish the trust’s position to negotiate competitive salaries, says Mr Godfrey.
The People’s Trust is gearing up to a September launch, but Mr Godfrey says it is still working through some of the finer details of how people will invest.
For example the minimum investment threshold is as yet to be established because the cost of investing a small sum at the time of launch is still being calculated.
Somewhat more importantly, the trust has not nailed down the total cost of investment – although the founders has already said that while he will aim to keep fees down, it will not be a super low-cost investment.
Mr Godfrey said the levy is likely to be around the 1.25 per cent mark but expects this figure will fall as the investment trust grows in size.
That means that investors must be willing to commit enough to the idea behind the trust and its principles to pay more than they would do for many other investments. A simple Vanguard global tracker fund could be bought with ongoing charges of 0.24 per cent, while rival multi-manager global investment trust Witan has ongoing charges of 0.79 per cent.
Investors will be able to buy and sell shares in the trust either through regular stock brokers or through a platform offered by the fund itself, where people can contribute as little as £10 per week through direct debt.