The managers and Boards that have real skin in the game

As an investor it is always reassuring to know that the fund manager and members of the Board have significant amounts of their own money invested alongside you. Without wishing to sound too cynical, this is the best guarantee that you can get that they will be acting in everyone’s best interests.

Canaccord Genuity has just released a detailed research report that looks in to this whole area. It covers 279 different investment trusts and includes the level of investment by the Board members, which is a statutory disclosure requirement, and the extent of the shareholdings owned by the managers wherever the data has been made publicly available.


The report identifies 61 chairmen or directors and 54 managers or management teams that each have shareholdings in their investment trusts that are worth more than £1m. Some of them have performed strongly, while others have struggled, but at least you know they all have a vested interest in doing the best that they can.

Strong returns

By far and away the largest personal investment is by Lord Rothschild and his daughter Hannah who between them have a £331m stake in RIT Capital (LON:RCP). The £2.9bn fund began life as the Rothschild Investment Trust and was set up to manage part of the wealth of the UK branch of the Rothschild family. It was listed on the London Stock Exchange in its current form in 1988 and aims to deliver long-term capital growth, while preserving shareholders’ capital.

RCP operates in the Flexible Investment sector and has a solid long-term track record. Over the last five years its shares are up 69.4% and they now trade on a 4% premium to NAV, which reflects the strong and persistent investor demand.

By far and away the largest personal investment is by Lord Rothschild and his daughter Hannah who between them have a £331m stake in RIT Capital.

The second biggest personal stake relates to a fund in the same sector, but it is much less well known. Tetragon Financial (LON:TFG) aims to generate stable returns by investing in a broad range of assets including bank loans, property, equities and infrastructure. It also provides exposure to an alternative investment management business, TFG Asset Management.

TFG has total assets of $1.9bn, with two of the directors – Reade Griffith and Paddy Dear – having personal stakes of £105m and £35m respectively. The fund was launched in April 2007 and according to the AIC has produced a five-year share price total return of 137.7%. Its shares are yielding 5.2% and trade on a surprisingly wide discount of 38%.

Discounts and premiums

Another relatively obscure fund on the list is the North Atlantic Smaller Companies Investment Trust (LON:NAS), where the manager, Christopher Mills, owns shares worth £92.5m. NAS has a market value of £371m and mainly invests in smaller companies based in countries bordering the North Atlantic Ocean. Mills was appointed in 1984 and is also the Chief Executive of the company, but despite the strong long-term performance the shares trade on a 15% discount to NAV.

I recently wrote about the Lindsell Train Investment Trust (LON:LTI), where the manager had publicly warned investors about the risks associated with buying the shares while they were on such a high premium to NAV.


LTI has built up a fantastic long-term performance record so it is interesting to note that Michael Lindsell, one of the managers, has a £5.8m holding, while his co-manager Nick Train has shares worth £5.2m in another of their successful funds, the Finsbury Growth & Income Trust (LON:FGT).

The £772m Personal Assets Trust (LON:PAT) also deserves a special mention where the manager, Sebastian Lyon, owns a personal stake worth £4.3m and the directors, Robin Angus, Stuart Paul and Frank Rushbrook, are each committed to the tune of more than £1m. PAT has generated excellent risk-adjusted returns and its shares normally trade in line with their NAV.

Poor performers

If you read my recent blog about the New Star Investment Trust (LON:NSI) it will come as no surprise that John Duffield’s name appears on the list of directors with the biggest personal stakes. His £39.9m holding in NSI has benefited from the improvement in performance over the last 12 months, but over the longer term the fund has a dismal record and it is easy to see why the shares trade on a 34% discount to NAV.

Another poor performer has been Better Capital 2009 (LON:BCAP) where the founder, Jon Moulton, has a £35m stake. The £214m private equity fund provides exposure to a highly concentrated portfolio of distressed businesses, but it has really struggled, with a five-year share price return of just 8.5%.

It is possible that the valuations have now been written down to such an extent that there could be some decent returns, as a large chunk of the shares have been bought by the British Empire Trust (LON:BTEM), and Asset Value Investors, the investment firm that manages it. Ruffer Investment Management has also built up a large shareholding with the three of them owning 57% of the company.

A more widely held casualty is the Fundsmith Emerging Equities Trust (LON:FEET), which is managed by the outspoken Terry Smith. It was launched in June 2014 yet the shares are only up 5.5% over the period, with the fund in bottom place in the Global Emerging Markets sector over the last 12 months.

Smith owns 500,000 shares (just over 2% of the company) that are worth about £5m, with the rest of the management team holding around 115,000 that are valued at £1.2m, but this would have been of little comfort to the other shareholders. FEET has a strong retail investor base, which probably explains why, despite the terrible relative performance, it trades on one of the narrowest discounts in the sector with the shares only about 1% below NAV.

The report also identified that 10% of chairmen and directors (excluding those appointed in the last year) have no personal shareholding in their funds. There are four companies where the Board doesn’t own a single share between them. They are: Prospect Japan, the Ground Rents Income fund, Carador Income and CVC Credit Partners European Opportunities.