View more on these topics

Rob Reid: The problem with the People’s Trust

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

Recommended

Pension-pot-700.jpg
1

Labour to press Government on Waspi state pension reforms

Labour also outlined its support for Waspi in its manifesto for the June election Labour is to call on the Government to lower the retirement age for women born in the 1950’s, allowing them to retire aged 64 on a reduced state pension, rather than aged 66. According to the Independent, in a speech at […]

2

Brexit: Govt tells City it plans to break with EU regulation

The Government has outlined plans for post Brexit financial services regulation in the UK to ultimately diverge from the European Union. Brexit secretary David Davis met with City leaders last week at Chevening, foreign secretary Boris Johnson’s country residence, the Financial Times reports. Davis told a breakout session for financial services that the UK would lose potential competitive gains […]

How to balance bottom-up with top-down research in constructing multi-asset credit portfolios

In this short video, Azhar Hussain, head of global high yield at Royal London Asset Management, explains how his team balance bottom-up with top-down research in constructing multi-asset credit portfolios. Watch the video in full The value of investments and the income from them is not guaranteed and may go down as well as up […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

There is one comment at the moment, we would love to hear your opinion too.

  1. Thanks for your very succinct breakdown of this. The whole thing looks to me more like a commercial attempt to look like they’re ‘doing the right thing’ rather than a genuine effort to improve or innovate.

    An opportunity missed, but let’s hope that someone else can pick up on what is, fundamentally, both a nice and a worthwhile concept.

Leave a comment