When Ian Sayers received his first introduction to investment trusts, he was less than certain about pursuing a career in this area.
He says: “My manager asked me if I knew what an investment trust was. When I said no, he showed me the two pages in the tax book dedicated to them and I remember thinking, ’Oh god, what am I getting myself into?’”
Until then, Sayers’ domain had consisted of tax management at Ernst & Young, where he ended up “by default”. He says: “Tax fitted my mindset. I liked the challenge of the complex legislation but did not want to work in banking.”
When Ernst & Young split investment management into a separate arm, Sayers jumped at the chance of joining the team. “Investment management appealed to me because it has an end product. I sometimes looked at banking and it seemed as though money was being pushed around in circles. With investment management the products you are serving are going into pensions, Isas, mortgage repayments.”
This started Sayers on the path that would lead him to the Association of Investment Companies, first as technical director, then deputy director general and finally to director general.
He says: “I worked on transforming 3i into an investment trust at Ernst & Young and could not have asked for a more interesting introduction. I got the bug from there.”
Sayers attributes his enthusiasm for investment trusts to their long-term per-formance. Their closed-ended structure gives investors access to asset classes such as private equity, which can be risky in the short term, and he says raising industry awareness of this is key for the AIC.
“The message we have to get across to people is that the journey may be a more bumpy one than for traditional investments in the short term but our long-term performance is shooting the lights out. Even during the recession our figures were good.”
AIC membership also defied economic conditions, particularly among offshore firms where it has risen from 5 per cent to 75 per cent of eligible firms in the last five years. Sayers believes the AIC’s direct service is what makes it so appealing to potential members: “We help the independent boards that make sure investment companies are run correctly. When new regulation comes in, technical guidance is key. A lot of it is written from a broad perspective and we translate the general into the specific.”
Sayers is also moving the AIC back into more traditional trade association territory. “By that I mean lobbying the Government. There is a lot of regulation coming our way and the trouble with the attitude of ’We have got to get this done yesterday’, is that you may get it wrong.”
This is what Sayers saw happen with the alternative investment fund managers directive, proposed by the European Commission to regulate all non-Ucits funds, a piece of regulation he considers unnecessary. “The AIFM directive is a response to the financial crisis, which the investment trust industry did not cause.”
The AIC has already secured changes to the AIFM directive’s headline rule, which proposed fund managers be held responsible for products. Sayers says: “That was a big problem for us because our products are run by boards, not managers. A new directive applying to portfolio managers that covers the same areas that the board is already responsible for would have created tension.”
There is still some way to go, however. “The question of additional supervisory duties for depositories could also cause problems. We have find depositories that charge a reasonable price, otherwise the investor will take the hit. “
Another piece of regulation Sayers will focus on this year is the retail distribution review, which he sees as “a chance for good IFAs to forget the worries about recommendations caused by commission issues”. He also feels it offers an oppor-tunity for investment trusts to shine.
“I don’t blame IFAs for not recom-mending them under the commission-based system but if everyone is on a level playing field, it comes down to competing on what you are offering and investment trusts do offer something different.
“I am not saying I expect IFAs to have 50 per cent recommendations in investment trusts but five to 10 per cent is not unrea-sonable. At the moment, it is a trickle and we need to turn that into a stream.”
However, Sayers feels there will be fewer new funds in 2011. “People are looking at the economic position and every time you get a Greece or Portugal, they get jittery. The interest rate remaining at 0.5 per cent may drive investment though, as people are looking for income and we have products that can help.”
Interest rates are another factor that affects demand for investments from AIC members. A rise in interest rates could choke off some of the demand for VCTs but at the moment they are reaping the benefit of low deposit rates.
“When interest rates rise, deposit rates go up and suddenly cash investments look more attractive and the desire to invest in more esoteric markets lessens. VCTs have had a healthy amount of fundraising this year, with £365m raised in 2010/11, 6 per cent up on 2009/10.”
Sayers says VCTs could also see a boost this year as higher earners’ pension contributions are affected by the new annual £50,000 cap. He does not expect to see investment trusts such as VCTs making up the majority of asset allocation but he firmly believes 2011 will be the year they come into their own.
“Everyone from myself to IFAs to DFMs buy investment trust shares but they are not being recommended. Some trusts say only 2 per cent of their shares are held by IFAs. That is a ridiculously small amount. I want to see IFAs recommending them as often as they should – and I hope it is in my term of office.”
Born: Hammersmith, London, 1968
Lives: Berkhamsted, Hertfordshire, with his wife and five-year-old son
Education: Charterhouse, followed by an English degree at Balliol College, Oxford. Chartered accountant and chartered tax adviser
Career: 2009-present: director general, Association of Investment Companies; 2005-09: deputy director general, AIC; 1998-2005: technical director, AIC; 1991-99: investment tax manager, Ernst & Young
Likes: Golf, chess and bacon sandwiches
Dislikes: Queues, jazz and motorway service stations
Drives: Smart car
Book: Five Minutes Off the Motorway published by Cadogan Guides
Film: Crimson Tide
Album: Blue by Joni Mitchell
Career ambition: To see investment companies recommended by financial advisers as often as they deserve to be
Life ambition: To play Augusta National and see my son open the batting for England at Lords
If I wasn’t doing this I would be…A lawyer