Trustnet Magazine Issue 43 September 2018 | Page 12

FE TRUSTNET
Aberdeen Diversified Income and Growth
Trust (19.76%)
IT Flexible
Investment
(11.09%)
LIBOR GBP 1
Month
(0.63%)
25%
20%
15%
10%
5%
0%
-5%
Accountability
There have also been moves to make
boards more accountable. In recent
IPOs, for example, Leatham says he
Success stories
There are also plenty of success stories has seen moves to align the interests
of board members and shareholders:
with boards, however, with great
“The recent launch of Ashoka India
progress made on reducing fees, for
Equity saw all four non-executive
example. Ian Sayers, chief executive
directors paid in shares subject to a
of the Association of Investment
minimum 12-month holding period.”
Companies (AIC), says: “Since 2013,
over a third of investment companies The most recent “skin in the game”
report from Canaccord Genuity
have reduced their charges to benefit
shareholders by cutting management showed the total investment by
fees, eliminating performance fees or boards and managers stood at £2bn,
meaning the figure has doubled since
introducing a tiered fee structure.”
2014. Only 14 per cent of directors
He adds that boards have also been
instrumental in introducing discount- have no holding in their trusts,
compared with 19 per cent in 2012.
control policies and now two-thirds
Nick Greenwood, manager of the
of investment companies have one of
Miton Global Opportunities fund,
these strategies in place.
says boards are changing because
Board costs can vary significantly,
the environment is changing: “These
but Peel Hunt’s head of investment
are directors of listed companies
trust research Anthony Leatham
PERFORMANCE OF TRUST VS SECTOR
AND INDEX SINCE MANAGEMENT CHANGE
BlackRock’s tenure. The board of
Alliance Trust must also take some
responsibility for the slow resolution of
its long-running problems.
says: “Based on a typical board of four
experienced individuals, the basic
annual directors’ costs would be circa
£120k. For a trust with, say, £150m
of net assets, the board cost would
contribute 0.08 per cent to the overall
ongoing charges figure. Putting this
into context, if we look at a sample of
circa 140 equity trusts with net assets of
£150m or greater, the average ongoing
charges figure would be around 1.1 per
cent, so the board would account for
7 per cent of total recurring expenses
that a trust may have.”
“Since 2013, over a third
of investment companies
have reduced their charges
to benefit shareholders by
cutting management fees,
eliminating performance
fees or introducing a tiered
fee structure”
[ BOARDS ]
14 / 15
Your portfolio
Source: FE Analytics
in a more litigious world, taking on
responsibility and liability. They
need to be more alert to anything
going wrong.” While he believes
this also sees board members more
worried about their own liability than
shareholder interests, in general he
believes it has improved governance.
He also believes the calibre of people
looking to become board members
is improving as interest in the non-
executive director sector increases.
“Dragons’ Den”
Leatham agrees that a well-balanced
board can have a “Dragons’ Den”
style impact on an investment
company. “A good example would be
the board of BB Healthcare, which
launched in December 2016,” he
says. “This board features a Fellow
of the Royal College of Physicians,
a chartered accountant, a fund
manager with 20 years’ experience,
a fund manager who trained as a
vascular surgeon and a Pulitzer Prize-
winning professor who also happens
to be one of the world’s pre-eminent
oncologists.” 
Sayers adds: “Investment
company boards are also attracting
more directors from outside the
investment company industry,
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