Investment Trusts – Update on Progress

ShareSoc News Item: Below is an article from guest contributor Annabel Brodie-Smith, who is the Communications Director at the AIC.

Investment Trusts are a very important part of investing, with AUM of £250 billion. They are arguably better, and better value, than funds. For new investors half a dozen investments trusts or passive ETFs or a mix of both are arguably the best way to start on your investment journey. Most sophisticated investors have at least part of their wealth invested in investment trusts.

We asked Annabel to give us an update on what is happening in the investment trust arena and what the AIC is doing. Her article below tells us about the good news on fees and governance issues; and the new AIC awards for the platforms who best help shareholder engagement.


Investment Trust Update by Annabel Brodie-Smith

Trust Boards

An independent board is one of the biggest advantages investment companies offer over other types of fund structure. Boards select an investment company’s asset manager, monitor its performance and can refine almost every aspect of an investment company’s operations to better serve shareholders. In the difficult conditions of the pandemic, boards have demonstrated this value in a big way.

In 2020 alone, 32 investment company boards negotiated lower fees for shareholders – around a tenth of the entire investment company universe. The types of fee changes boards implemented included lowering the management fees paid to their asset managers, abolishing performance fees, or introducing tiered fees where charges fall as assets increase, enabling shareholders to benefit from economies of scale.

Boards were proactive in addressing performance and liquidity issues last year too. Eight investment companies changed their asset manager, including high-profile moves for Edinburgh Investment Trust, Temple Bar and Baillie Gifford China Growth.

Mergers and Darwinism

We also saw the merger of two well-known investment companies last year, Perpetual Income & Growth and Murray Income, and ten investment companies wound up with their boards recognising that it’s sometimes in shareholders’ best interests to return capital.

Corporate Darwinism like this is a sign of a healthy industry where boards are putting shareholders’ interests first.

Thankfully, the pandemic is easing in the UK, but there’s little sign of investment companies’ boardroom activity slowing down in 2021. Twelve investment company boards have cut fees so far this year and three have changed asset managers. Mergers have continued with a link-up of Invesco Income Growth and Invesco Select UK Equity and another three companies have wound up or accepted takeover offers.

More mergers are due to be voted on or discussed over the coming months, with a possible combination of BH Macro and BH Global, two well-known names in the Hedge Fund sector. Whilst big doesn’t always mean better, there are advantages to scale. Liquidity can improve and fixed costs can be spread over a broader base, lowering expenses for shareholders.

However, fees and corporate actions aren’t the only areas where boards have been busy acting on behalf of shareholders. They’ve also been making sure that their strategies adapt to meet the changing needs of shareholders and society.

ESG Matters

In the past two months F&C Investment Trust (FCIT) and Alliance Trust, two of the largest and longest-established investment companies, have announced that their portfolios will target net zero by 2050. Investment companies have consistently evolved to meet shareholders’ needs in their 153-year history and F&C Investment Trust’s Chair, Beatrice Hollond, summed this up in F&C’s latest annual financial report:

“FCIT has been resilient, responsible and prosperous for over 150 years and we are pleased to announce our commitment to transition the portfolio to net zero carbon emissions by 2050 at the latest. Our focus has always been on delivering sustainable growth in capital and income over the longer term. Shareholders can be assured that it will remain so.”

Even more recently the board of Dunedin Income Growth proposed adopting an enhanced ESG investment framework. The proposals include excluding companies where significant proportions of revenue come from tobacco, controversial weapons or electricity generation incompatible with the Paris Agreement. Chairman David Barron said the strategy would be a “natural development of our approach and is consistent with investing in companies that can pay growing, reliable dividends over many years.” But it’s shareholders who will have the final say on these proposals when they vote in June.

Platforms and Voting

Engaged shareholders, working hand-in-hand with proactive boards, are essential for driving positive changes at investment companies. Temple Bar’s Chairman Arthur Copple summed this up best at a recent AIC media briefing: “Boards should remember that shareholders are key, and they should always keep good lines of communication with them. Listen to what your shareholders want.”

However, for boards to be able to listen to their shareholders it’s very important that shareholders have their say about the running of their company. With more investment company shareholders then ever holding their shares on platforms, it’s vital to make sure these shareholders have the opportunity to influence important decisions about their investment company.

At the AIC, we understand that shareholders are often frustrated by the difficulties of voting on platforms – and this frustration is shared by our members, the directors of investment companies. To encourage platforms to make life easier for shareholders trying to exercise their rights, we’ve launched a Shareholder Engagement Award open to all direct-to-consumer platforms and judged by platform consultancy, the lang cat.

This award will scrutinise the processes platforms have in place to facilitate voting, AGM participation and corporate actions, as well as access to important documents and data. We’ll be announcing the winner in September and we believe this award will encourage platforms to do more to engage investment company shareholders.


It’s been a difficult 18 months for us all, but generally investment companies have performed well despite markets’ dramatic moves, and independent boards can definitely take some of the credit. To the end of April, the average investment company was up 42% over one year, 103% over five years and up 214% over ten years. After months of lockdowns and restrictions I know many investment company directors are looking forward to the opportunity to get out and about and meet their shareholders in person again. A virtual presentation just isn’t the same if you can’t have a glass of wine and a chat with fellow shareholders at the end.



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