The People’s Trust, founded by former Investment Association chief executive Daniel Godfrey, launches its offer period today after a year and a half of fundraising, with its backers saying it will challenge the short-termism of the existing system.
Godfrey aims to raise £125m before the trust’s IPO on the London Stock Exchange on 17 October and subsequently on the Social Stock Exchange.
The company says that £1.5m will be seeded from the board at launch, including Godfrey.
The People’s Trust will seek total returns of 7 per cent annually over a seven-year period and won’t carry any performance fees or executive bonuses.
Godfrey says he’ll will waive half his salary as chief executive for two years or until the firm reaches net assets of £250m.
As a starting point, the fund will be 1 per cent invested in charities and community interest companies with a direct social impact.
As announced in May, Godfrey has given a seven-year mandate to fund managers from First State Investments, JO Hambro Capital Management, Lansdowne Partners, Artemis and Comgest.
Godfrey says: “The People’s Trust aims to break away from a failed past. By creating our own investment chain, we have developed an investment fund that is immune to the short-term pressures that are endemic to so much of the financial services industry.”
Liberal Democrats MP leader Vince Cable says the trust in its current form will challenge the short-termism of the UK investment industry.
He says: “The UK needs a radical transformation of capital markets if they are to fulfil their purpose of sustainable wealth creation.
“The current system awards prizes for short-term, relative returns and this comes at a high opportunity cost to long-term productivity and GDP growth as well as poorer returns for millions of pension savers.”
Estimated ongoing costs are 1.07 per cent. The fund will be available directly through the firm’s website and the major platforms including Hargreaves Lansdown, AJ Bell and Interactive Investors.
Questioning the models
Shore Financial Planning director Ben Yearsley says the trust is “an interesting addition” to the market for investors seeking a long-term global portfolio.
He says: “I like the premise of seven-year terms for the managers as that gives them the opportunity to truly invest for the long term; however, I do worry whether investors will be patient enough. The mix [of managers] is excellent, and I would single out First State’s Martin Lau as one of the highlights.”
However, Yearsley questions whether advisers would be able to fit the fund into asset allocation models due to it being a global fund, but with a large percentage in the UK.
Godfrey says if advisers don’t use the trust on those grounds it means the current model is “flawed”.
He says: “We think the current model needs reforming. Any investment needs optimised returns over time. You need total return and not tracking down error.”