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AITC to bring in code for investment trusts

The AITC will publish a code of conduct for investment trusts next year on the back of research showing that the industry is keen to its tighten corporate governance.

The trade body is embarking on a three-month consultation following the publication of research by consultants Trust Associates which highlights the industry&#39s concerns about how some boards set about managing their trusts. It is requesting feedback on a range of suggestions, including whether boards should regularly review their trusts&#39 investment mandates and longterm strategy in order to agree appropriate guidelines within which trust managers should operate.

This suggestion came after the respondents in the research, including regulators, investors, independent advisers, directors and brokers, said they were concerned about the tendency of boards to get bound up in detail and lose sight of the overall strategy.

Other topics up for discussion include whether managers should refer to their board before making certain transactions and whether their fee should be based on gross assets, net assets or market capitalisation.

If a fee has a performance-related element, the AITC suggests it is structured in a way which reduces the basic salary and does not encourage a trust&#39s manager – who it says could be subject to regular independent appraisals – to take excessive risk.

It also says boards will have the option of setting out in their report and accounts the guidance they have given and the performance of the fund manager.

Communications director Annabel Brodie-Smith says: “We are holding up a mirror to the industry to help improve standards and deliver value to shareholders.”

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