Almost a fifth of investment trust directors have no investment in their company and so show no alignment of interest with their shareholders the report claims.
In the report, titled ‘Skin in the game – the good the bad and the absent’, Collins Stewart said it believes personal share ownership from board members and trust managers "sends a powerful message to both existing and potential investors".
It added that the lack of shareholdings by many board members is disappointing and investors in these funds are entitled to ask why there is not a greater commitment from its proponents.
Specifically, 18.5% of directors have no investment in their trust. This figure drops to 13.5% when those appointed in the past year are excluded.
Among the big-name funds lacking director conviction are the Schroder Income Growth Fund, Aberdeen Asian Smaller Companies Trust, Jupiter Primadona Trust and Henderson European Focus Trust.
Long-serving members
Peter Readman, director of the Schroder Income Growth Fund has been on the board since 1999, while Nigel Cayzer has been on the board at Aberdeen Asian Smaller Companies for more than 15 years.
Jean Claude Banon at Henderson European Focus is the longest-serving board-member with nothing invested in his trust, currently holding a 20-year tenure under his belt.
Meanwhile Lorna Tilbian at Jupiter Primadona has served on the board for a mere 10 years without putting her hand in her pocket.
"Investors do like to see managers, directors and chairmen at least with some sort of share in their investment trust," Alan Brierly director of investment companies at Collins Stewart.
"These vehicles are regarded as long term savings vehicles by many shareholders, if investors are expected to put money in them for the long term why are the people involved in running them not?", he asked.
But not everybody thinks the alignment of interest is as clear cut.
Annabel Brodie-Smith, communications director for the Association of Investment Companies said: "There’s no hard and fast rule on this.
Clearly some investors think if directors and managers have got holdings it better demonstrates their interests are aligned.
"Having said that some people have very strong views the other way and say if they have a big holding perhaps they are too influenced by it. It is a very subjective debate."
Manager investment
Also in the report Collins Stewart listed managers with more than £500,000 personal investment in the trust they run.
Interestingly, of the trusts mentioned above only one manager has a personal investment above this threshold: Hugh Young, manager of the Aberdeen Asian Smaller Companies Trust, with £730,000 in his trust.
Analysis will follow on the correlation (if any) between board, director and manager investment in their trusts and its subsequent performance.
In the meantime, what do you think? Is investment from the board or manager something you consider when selecting investment trusts? Add your thoughts below.
