Join our community of smart investors

The People's Trust announces full manager line-up ahead of September IPO

Former Investment Association head Daniel Godfrey plans to launch his investment trust in September
May 25, 2017

In 2015 Daniel Godfrey was ousted from his position as chief executive of the Investment Association (IA), the trade body that represents UK investment managers, after clashing with members over his attempts to increase industry transparency on fund costs. But far from leaving the industry, since then Mr Godfrey has crowd-funded more than £115,000 from more than 2,300 'founders' to set up The People's Trust, which he says will offer investors an alternative model to the short-termism within the fund industry. The investment trust's initial public offering (IPO) is due in September.

The People's Trust will target a return of consumer prices index inflation plus five per cent a year, after costs, over a seven-year period. Mr Godfrey says that assuming inflation averages 2 per cent a year, the target nominal return will be 7 per cent a year compound over seven years.

The People's Trust will have a multi-manager structure whereby external managers will run its portfolio. These have been selected by Willis Towers Watson, the investment advisory business that has also been employed by Alliance Trust (ATST) to select its underlying managers, and which Witan Investment Trust (WTAN) has used to help with research on its underlying managers. Both these trusts also have a multi-manager structure.

Willis Towers Watson has selected five external managers to run The People's Trust's equity portfolio. Mark Niznik and William Tamworth at Artemis Investment Management will run a UK smaller companies strategy. Comgest will manage a pan-European strategy, which will be run by Arnaud Cosserat, Franz Weis, Alistair Wittet and Sébastien Thévoux-Chabuel.

First State Investments' Asia team, lead by Martin Lau, will manage Asia-Pacific including Japan equities. J O Hambro Capital Management's Ben Leyland and Robert Lancastle will run global equities. And Per Lekander of Lansdowne Partners will invest in the shares of companies involved with clean energy.

Mr Godfrey says the investment managers have been chosen because of their success in delivering long-term returns and their focus on sustainable wealth creation. They will create concentrated equity portfolios of between 10 and 40 of their best ideas, but The People's Trust will set capacity constraints to prevent their portfolios from growing too large, as this could dilute the impact of the investment style.

The managers will be assessed on their performance over seven years, which is much longer than with most other funds.

"Giving managers a seven-year period should enable them to run the money in a way that should lead to better returns," explains Mr Godfrey. "If you're buying shares because of short-term valuation rounds and spinning your portfolio around two or three times a year, if something goes wrong with a company [you're holding] it's just a matter of luck whether or not you're holding it when the music stops. But if you're a long-term investor in a company, if something goes wrong you will suffer a permanent loss of capital, so responsibility issues become much more important to you."

The trust's underlying equity managers will be expected to engage with companies and vote at shareholder meetings in a way that encourages long-term thinking. This could include pressuring companies to improve their approach to employees, investment in innovation, tax transparency and climate change. From a responsible investing perspective, the People's Trust will exclude companies that invest in controversial weapons.

The People's Trust will also initially allocate 1 per cent of its assets to Big Issue Invest (the social investment arm of The Big Issue) to put into a portfolio of social impact investments. These will largely consist of loans to social impact enterprises and charities, and the allocation could grow to up to 5 per cent of the trust's assets.

The trust is also planning to launch its own share save scheme and individual saving account (Isa), which will allow individuals to invest in it directly. But investors will also be able to buy its shares from brokers and platforms.

Potential investors can still become founders with a minimum investment of £20, or £10 if they are aged under 35, until 31 July. Founders will be offered a small discount to the offer price at launch, which is likely to be under 1 per cent. Mr Godfrey says the more money raised by founders, the more successful the launch will be and therefore the lower the charges the trust will need to apply. Any crowdfunding money left over after the launch will be put into the trust's starting capital.

The People's Trust initial ongoing charge is expected to be around 1.5 per cent, which is a good deal more expensive than that of many funds, including Alliance Trust's current ongoing charge of 0.54 per cent and Witan's of 0.79 per cent. But Mr Godfrey expects this to fall as the trust grows in size, reducing to around 1 per cent when the trust has £300m-£400m assets under management.

He adds: "It's more expensive than many funds, but you are getting a roster of managers who are giving us higher-conviction portfolios than they run in their other funds available to the public. And we clearly have our own costs - the board, listing and lawyers. But everybody involved in the company has a commitment to keeping the cost as low as they possibly can and driving it down further as we acquire scale."

The trust's internal employees, for example, will get a salary, part of which will be paid in The People's Trust shares that they'll have to hold for at least seven years, and they won't receive bonuses.