Investec Securities’ annual Skin in the Game research found “seismic” changes both in improving gender diversity and in the number of investment trust managers and directors personally investing in their company since the first report in 2010.
The latest report highlighted “spectacular” progress in improving gender diversity on investment trust boards. Of the 298 investment companies and 1,445 chairs and directors included, Investec found over 40% of directorships are held by women, compared to 8% in 2010. Meanwhile, all-male boards have fallen from 159 (67%) to 13 (under 5%) over the period.
Commenting on the findings, Interactive Investor collectives specialist Kyle Caldwell said: “The investment trust sector was once dubbed ‘male and stale.’ No longer, and it’s notable that our female customers have a clear preference for investment trusts compared to our male customers. The average female customer has 23% of her portfolio in investment trusts, versus 19% for men, according to interactive investor’s Q1 2023 private investor performance index.
“Today’s report shows dramatic progress in just thirteen years, with the number of company directorships now held by women up 33 percentage points, and exceeding the 40% target set by FTSE Women Leaders Review for Women on Boards of FTSE 350 companies by 2025, early. This is a real positive for investment trust investors.”
Managers putting their money where their mouth is
Since its first report in 2010, Investec has witnessed aggregate investment by board and management rise to £4.2bn from £687m. Investec analysts said it has “become the norm” for boards and managers to have a reasonable investment in their own companies.
Analysts found the largest investment by a board or manager was Bill Ackman and the management team at Pershing Square Holdings, who hold £1.36bn.
Managers also commended for backing their respective trusts were Christopher Mills, director and manager of the Oryx International Growth Fund and the North Atlantic Smaller Companies trust, and Nick Train, who has invested £45.2m in the Finsbury Growth & Income fund alongside managing partner of Frostrow Capital Alistair Smith.
On boards, 53 investment trust chairs and directors have an investment in excess of £1m, while 88 management teams also have a seven-figure commitment.
However, the firm called out 40 investment company boards which had aggregate shareholdings worth less than total fees received over a six month period.
Investec analysts said: “We firmly believe that personal share ownership by boards and managers sends a clear and powerful message to both existing and potential investors. Arguably, as we continue to navigate choppy waters, with discounts close to levels last seen in the global financial crisis, this alignment of interest is even more important in helping to underpin investor confidence.”
Fifteen chairs (5.1%) had no investment at all in their firm, although eight were appointed in the last 18 months.
Interactive Investor’s Caldwell added: “This report sheds a level of scrutiny on the investment trust sector that investors in open-ended funds could only dream of. But there’s no question that the issue of skin in the game disclosure can be uncomfortable for some, and we respect and appreciate that.
“But some of the toughest questions are often the ones investors want to hear the answers to. It’s why I ask every fund manager I interview whether they personally invest in the fund or investment trust they oversee.
“All of the fund managers we’ve asked have said they do have their own money investing, meaning they share both the good and bad times with investors. Whatever side of the fence investors might sit on, today’s report sheds a spotlight on the investment company sector that many would love to see replicated in the wider funds universe. The fact that it doesn’t is because investment companies are listed companies, so the door is already open when it comes to disclosure from a board of directors’ perspective.”
