Rathbones head of multi-asset David Coombs has criticised the over-representation of asset managers on investment trust boards, claiming that it detracts from their independence.
Coombs (pictured) believes wealth managers should have greater representation on the boards of investment trusts.
He says: “In many cases, non-executive directors are drawn from the asset management community, the sellers, rather than wealth management, the buyers, which is odd considering they are supposed to be representing the interests of shareholders.”
“This opens up the accusation of a ‘cosy club’. I’d go so far as to say the status quo is not independent enough.”
Coombs is also critical of a general lack of foresight in terms of product innovation in the space.
He says: “The asset management and stockbroking communities have also been too slow in identifying new markets for the structure. They are over-reliant on long-held relationships.”
He believes there needs to be a greater alignment between management and shareholder interests.
Coombs says: “Brokers need to be incentivised to promote funds in the secondary market, as opposed to taking front-end fees in the primary market. Annual management charges should be linked to market cap, excluding leverage, not net asset values.”
Association of Investment Companies communications director Annabel Brodie-Smith said: “Investment company board independence is strictly governed by the FSA’s Listing rules and the majority of the board has to be independent from the manager. The AIC Corporate Governance Code emphasises the importance of a diversity of skills on investment company boards. Investment company boards and their recruitment agencies aim to find good candidates from a diversity of relevant backgrounds.”