As the debate on the transparency of fund charges continues, many see the launch of The People’s Trust as another paradigm shift, or at least a significant tipping point.
I found the prospectus of this investment trust equally patronising and disappointing. When the first round of fundraising was announced it seemed to be at an inadequate level unless significant soft help – potential interest that is often conditional – was in place.
The big problem with soft help is that try as you might, you are compromised and perhaps that is where the trust’s seven-year term comes in. Pension scheme trustees are put on notice to review performance regularly but here we have an offer where the investment teams are given seven years, with no apparent mechanism for their removal in that term.
Financial planners could then be faced with financial resources that are inadequate, when they could have been safeguarded had the money moved to an alternate management team. I also noted the 1-5 per cent allocation to social investments. Initially, it is set at 1 per cent so will have no impact on performance either way and seems to be a token gesture at best.
Given the circumstances that led to this launch, I find it strange that we end up with what appears to be such an inflexible investment option. The charges are far higher than I expect most commentators would have predicted and given the difficulty other recently launched trusts have had, I can see the situation where it is unable to raise the funds to the full level of the offer.
Having taken the time to review the board of the trust I cannot see anyone whose background is not from the investment industry – hardly what you would expect, especially when the social invest-ment angle is meant to add credence.
We have an investment option suggesting it is following a strategy close to an absolute return fund and the seven-year term, making it unsuitable for benchmarking, to paraphrase the prospectus. This sets alarm bells ringing for me.
I have always argued that the inability to measure investment performance in a manner that all can understand is why total charges are not readily apparent. Any “barriers” to tracking charges or benchmarking performance can only make my case for this launch not delivering anything new.
Reduced pay for the chief executive or no pay for the non-executives do not make enough of a difference. Had the model taken a “mutual” approach where investors benefited directly from the trust’s success or had charges rebated, I could have seen the USP, but I cannot. I can’t wait to see the key information documents for this investment or whether Hargreaves Lansdown, theoretically, would have any of it on its 150 list – but I will not hold my breath for the latter.
If I have this all wrong and have taken matters out of context, that is not my fault –it is the inadequacy of the information in the papers I have seen so far. We clearly need new thinking in investment charges and objectives but The People’s Trust launch adds nothing to the debate and even less to the market.
Robert Reid is a director at The Ideas Lab