The People’s Trust, which launches next month, will set out to eliminate the ‘short-term pressure that plagues the investment chain’.
The People’s Trust, set up by Daniel Godfrey, former chief executive of the Investment Association, today publishes its prospectus and launches an offer for subscription. The aim is to raise £125 million by 10 October when the offer closes. The trust plans to list on the London Stock Exchange on 17 October, and targets a 7 per cent annual return over seven years after costs.
Godfrey set up the trust through a £100,000 crowdfunding initiative last year, to provide an alternative to the current pressure on fund managers to produce short-term relative outperformance.
The trust seeks to adopt a more sustainable, ‘high-stewardship, low-turnover’ investment approach, taking a seven-year view of investments. The five equity managers hired to manage different elements of the portfolio are on seven-year contracts in line with this approach. They include Artemis, JO Hambro and First State Investors.
The board says it ‘will encourage investee companies to stand up to pressure from shorter-term investors and markets, and to invest in their own long-term sustainable futures’, in the expectation of ‘better long-term returns for our shareholders’.
Godfrey says the trust will be run on an ethos of transparency and benefits for shareholders; so for example all economies of scale will be fed back into lower costs for investors, and there will be no performance fees and no executive bonuses.
In addition, Godfrey as chief executive will waive half his salary for the first two years or until net assets under management reach £250 million.
At the outset, 1 per cent of the trust’s assets will be allocated to a Social Impact investment fund which invests primarily in loans to social enterprises and charities tackling poverty or creating opportunities for people and communities in the UK. This could rise to 5 per cent in due course.
‘The People’s Trust has created our own investment chain so that we can focus on long-term, sustainable wealth creation without the short-term pressure that plagues the investment chain. Short-termism may be caused by profit risk and career risk, but it has done enormous damage to investor returns and to the potential that long-term investment has to make the world a better place,’ says Godfrey.
The FCA published an asset management study in June that was highly critical of fund management practices, in particular the lack of competition and of transparency.
Ryan Hughes, head of fund selection at AJ Bell, says: ‘The People’s Trust is an innovative idea that looks to address some of the major issues that the fund management industry has struggled with for a long period. Investors have been genuinely put at the heart of the structure, addressing some of the challenges laid bare by the FCA’s recent asset management review, while the long-term approach is something I wholeheartedly agree with amid an industry backdrop that is too focused on the short term.’
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