How Investment Trusts are Innovating for Profit

ASK THE EXPERT: Investment trust boards are very good at listening to their shareholders and they’re not afraid to ask them exactly what they want

Jackie Beard, FCSI 3 June, 2014 | 12:27AM
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Investment trusts may be old in structure, but it doesn’t mean they’re resistant to change. One of their key positives is their ability to innovate and change to retain their relevance for today’s investors. We’ve seen a handful of funds do this recently, in different ways, and it proves the value and experience that an independent board of directors can add.

There’s no fear of change among investment trust boards

Investment trust boards are very good at listening to their shareholders and they’re not afraid to ask them exactly what they want. No matter if it doesn’t fit with an asset management firm’s fund line-up, or that it’s not part of that firm’s long-term strategic planning.  For them there’s always an alternative and if necessary a new manager can be brought in.

There are several recent examples of positive change. A very recent one is Hansa Trust (HAN). This fund was originally set up to preserve and grow the wealth of the Salomon family. Its approach also enables investors to access investments that may not otherwise be accessible to them and the idea of investing alongside family money has definite appeal for some.

However, while this fund had some great features, there was little in the way of cohesion bringing them together. A strategic review has resulted in the arrival of a new CIO, a return to investing roots for manager John Alexander in the small-cap space, a widening of the fund’s investment remit to other asset classes and geographies and the introduction of dynamic asset allocation. None of these on their own are a radical change, but combined they make for a fund that’s much more in line with what investors are seeking today.

Another example is Aberdeen Japan (AJIT). This used to be an Asian equity mandate that included Japan. But increasingly investors like to make their own decisions regarding an allocation to Japan, particularly given its rise in prominence since the appointment of Prime Minister Abe. So, in late 2013, the fund changed its remit to focus solely on Japan and divested from Asia, making it more specialised but more relevant to today’s investors.

Yet another example is Alliance Trust (ATST). The arrival of Ilario Di Bon was the first of a number of changes made at this fund; this was soon followed by a re-alignment of research responsibilities among the analysts—and that included changes to the analysts themselves. The fund now embodies the firm’s core skills—which have been clearly laid out--and already the performance has started to improve.

At other funds, the changes are work-in-progress. British Assets (BSET) has moved from a set of sub-portfolios managed by several individuals at F&C, to just two managers—Ian Robinson for bonds and Phil Doel for equities and the latter has overall responsibility. It’s been a gradual process to transition these portfolios but already it means there are now just two decision-makers, giving far better cohesion and risk management at the fund.

Finally, at Henderson Global (HGL) there is a new man in charge after more than 30 years, following the decision by Brian O’Neill to step down from the fund’s management. This created a window of opportunity to evolve this fund under the guidance of new manager Wouter Volckaert and to make it truly global, rather than retain a significant UK bias for reasons now historic.

These changes may not be huge, but they show that there’s no fear of change among investment trust boards and managers and such proactivity should be encouraged. Relevance for today’s—and future—investors, is key.

This article has also appeared in Investment Adviser magazine

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
abrdn Diversified Income & Growth Ord45.10 GBX-0.22Rating
abrdn Japan Investment Trust Ord  
Alliance Trust Ord1,206.06 GBX-0.49Rating
Hansa Investment Company Ltd Ord221.00 GBX1.38Rating

About Author

Jackie Beard, FCSI

Jackie Beard, FCSI  is Director of Manager Research Services, Morningstar EMEA

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