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Daniel godfrey

It is 10 years since Daniel Godfrey took over as director general of the Association of Investment Companies. In the world of investment trusts, this may not seem like a long time, after all, the first one, Foreign & Colonial Investment Trust, was established in 1868, and the trade body, the Association of Investment Trust Companies was set up in 1932. But in terms of a career, 10 years is a considerable length of time, particularly given the challenges that investment trusts have faced during this period.

Godfrey was a bit of a late convert to investment trusts. Aside from a brief stint selling burglar alarms door to door when he left university, Godfrey’s entire career has been spent in retail financial services. But although his early CV includes stints at Schroders and Mercury Asset Management, his first exposure to the world of investment trusts only came when he went self-employed as an independent marketing and communications consultant.

After that, he took up the opportunity to move to Fleming Investment Management as marketing director for investment trust business.

Godfrey says when he took over at what was then the Association of Investment Trust Companies, his first priority was to forge a sense of identity for the investment company community.

To achieve this, he says his first task was to change the structure of the AITC to help the industry modernise and promote itself.

“In common with many people, I thought they did not seem to get a fair crack of the whip in terms of the weighting in people’s portfolios and it was only really through the industry working together that you could start to make changes. So that is why the AITC role was attractive, because I wanted to see investment companies to thrive and do well.”

Godfrey says that, like many people who work for investment companies or investment trusts, he is passionate about the business and believes that investment companies have something different to offer investors. “It has huge potential and some really interesting features, such as, independent boards and the ability to gear.”

The history that goes alongside some of the investment trusts is also a differentiator between them and some of the more modern investment vehicles.

But the recent history of investment trusts is more familiar for most people, particularly at the start of this decade, only a couple of years into Godfrey’s tenure, when the issue of split caps hit the headlines, leaving thousands of investors out of pocket.

He says this was a difficult period in the AIC’s history and describes it as a three-part process – “the crisis, the collapse and the consequences”.

One of the consequences was a change to the investment rules for investment companies to prevent cross-investing in other investment companies but, partly due to the AIC’s efforts, investment companies were not subject to any further regulation following the split-cap crisis.

But Godfrey says this was not necessarily the most difficult task he has had to face during his time at the AIC.

“Getting the industry to agree to fund a generic marketing campaign to the tune of £15m-20m was a challenge,” says Godfrey.

However, perhaps trickiest of all was the rearguard action that the AIC fought against a change to the listing rules that would have seen a weakening in the listing requirements for investment companies.

“We had a fundamental disagreement in the listing rules review over whether or not investment companies should be allowed to adopt the European light standards for listing. We were very much against that but the investment banks were very much in favour of it and the FSA had already made the decision to allow it, so to change their mind on that was a massive challenge and one which worked out ultimately very well for our industry because what we have got out of it is a much more flexible regime but one which has the appropriate levels of standards to protect investors.”

The AIC’s victory in the European Court of Justice this year over the payment of VAT on management fees is another notable victory. Godfrey says it is a dramatic step to take your own Government to the ECJ but this the culmination of a long-running campaign.

“Our real beef was the management fees paid by Oeics and unit trusts to their managers were exempt from VAT but for investment trusts they were not.”

The saving in VAT is estimated to be around £10m a year and Godfrey says investors will see a difference. “The total expense ratios will fall, although not by very much, but over time that compounds so they will see better returns as a result.”

This year also sees another potentially very significant event for investment companies.

At the end of last month, the Treasury announced a consultation on the taxation of asset management and one of the issues examined is the taxation of interest-bearing investments held by investment trusts.

The current rules mean fixed-interest investments are kept to strict limits because of high rates of tax levied on high levels of investment.

Godfrey says the new proposals are great news, not only for existing investment companies but they also open the door to a whole new type of investment trust.

“It will allow existing investment trusts to extend their investment choices in what they can invest in and it may create a new types of investment company as well.”

But it may be a few years time before the full extent of the changes becomes apparent, as Godfrey concedes: “I think we will have to look back at that in 10 years to see how significant it has been but there is no doubt it is significant because the industry has wanted to invest tax- efficiently in bonds since before I joined the AIC.”

Born: London, 1961

Lives: Westminster

Education: Westminster School, University of Manchester

Career: 1998-present: director general, Association of Investment Companies; 1994-1998: marketing director for investment trusts and communications director for unit trusts, Fleming Investment Management; 1991-1994: self employed; 1989-1991: head of sales and marketing, Laurentian Unit Trust Management; 1988-1989: product development manager, Mercury Asset Management; 1985-1988: marketing manager, Schroders; 1982-1985; broker consultant, UK Provident

Likes: Travel, theatre, cinema and food

Dislikes: Back-stabbers and people who are not straightforward with their motives

Drives: We have a Mini as the family car

Favourite book: I Know Why The Caged Bird Sings by Maya Angelou or May Contain Nuts by John O’Farrell

Favourite film: Pulp Fiction

Favourite music: David Byrne/Talking Heads

Career ambition: I would like to see IFAs using investment companies to the extent that they should

Life ambition: For my wife and myself to see our children settled and happy with children of their own

If I wasn’t doing this I would be…I really don’t know. I’m very happy doing what I am doing.

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