Skin in the game

Recent research by the broker Canaccord Genuity has highlighted which boards of directors and fund managers have the most significant personal stakes in their own investment trusts. Having ‘skin in the game’ doesn’t guarantee that the fund will deliver excellent performance, but it is the best indication there is that those involved are prepared to put their money where their mouth is.

The report looks at a total of 283 investment trusts and between them their boards and managers have just over £2 billion of their own money at stake, although this could be an understatement as it is not mandatory for the fund managers to disclose their own personal holdings.


There are 58 chairmen or directors with a personal investment worth more than £1 million. Leading the way is Lord Rothschild and his family who between them have £336 million invested in RIT Capital Partners (LON:RCP). The £3 billion vehicle was originally associated with their family bank, but became a listed investment trust in 1988 and over the intervening period has established an excellent reputation as a defensively managed global fund.

Less well-known is Tetragon Financial Group (LON:TFG) where the directors, Reade Griffith and Paddy Dear, have a combined personal stake of £146 million. The £1.1 billion fund aims to provide stable returns by investing in a range of other funds and direct investments. It attempts to do this by allocating capital to strategies that can deliver returns at different stages in the market cycle.

There are 58 chairmen or directors with a personal investment worth more than £1 million.

Over the last five years Tetragon shares have returned a steady 54% and they are currently yielding 5.6% with quarterly dividends. Normally this would have made them highly sought after, but their low profile and expensive fees – it has an annual management fee of 1.5% plus a performance fee – has meant that the fund is trading on a 40% discount to the estimated NAV.

Another low profile example where the directors have a significant stake is North Atlantic Smaller Companies (LON:NAS). Christopher Mills and Peregrine Moncreiffe have a combined personal investment of £108 million in the £388 million fund and despite posting a creditable five-year return of 90% the shares are trading on a 24% discount to NAV.

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Unfortunately, having a well-known director with a large personal stake does not guarantee outperformance. If you need any proof of this you only need to look at Jon Moulton’s Better capital (LON:BCAP) or John Duffield’s New Star Investment Trust (LON:NSI), both of which are languishing on wide discounts despite the latter’s recent improvement.

When it comes to the managers, the report has identified a total of 67 management teams that have a combined personal investment worth more than £1 million. Notable examples include: Scottish Mortgage (LON:SMT), Riverstone Energy (LON:RSE), Pershing Square Holdings (LON:PSH) and Manchester & London (LON:MNL).

Where a director or manager has a significant personal stake in their own fund it sends a powerful message to private investors who can take comfort from the fact that their interests are aligned. You would still need to conduct your normal research, but at least you are not starting on the back foot and wondering why those who make the decisions are not prepared to back their own judgement.