SERIAL investment trust chairman James Ferguson is a far bigger supporter of the vehicles he represents than most of his counterparts in the Scottish investment trust sector, ploughing nearly £9 million of his own cash into four different portfolios.
The former chairman of Edinburgh fund management house Stewart Ivory, which was taken over by First State Investments in 2000, is also a former deputy chairman of trade body the Association of Investment Companies.
He currently sits as chairman of Aberdeen Asset Management’s North American Income Trust, First State Stewart’s Scottish Oriental Smaller Companies Trust and the Baillie Gifford-managed Monks Investment Trust in addition to being a board member of Independent Investment Trust.
Although his investment in North American Income is relatively small at just over £193,000, he was £1.3m in Monks, £2.7m in Scottish Oriental and £4.7m in Independent, according to research from brokers Canaccord Genuity. In addition, he has £2.3m invested in London-based OLIM Investment Managers’ Value and Income Trust, which he also chairs.
At Monks and Independent, Mr Ferguson’s fellow director Douglas McDougall, who chairs Independent, invests £8.5m and £35m respectively while Independent director Robert Laing has a £3.5m position in the trust. Similarly, Monks director Edward Harley invests just over £1m in that trust.
According to Matthew Read, a senior analyst at investment research business QuotedData, the fact that directors are willing to take such large positions in the trusts they are responsible for shows that their interests are in line with those of other investors.
“Although not a main qualification for board membership, I am very keen to see directors making personal investments into the trusts they oversee as it helps to align their interests with those of other shareholders,” he said.
“I believe that, for all investors, having capital at risk helps to focus the mind. I also think that the presence of key individuals with personal investments offers other investors some reassurance. You can see that they will benefit, or be penalised, as a direct consequence of their decisions.”
It is not just the directors of certain Scottish-based trusts that have large positons in their portfolios, with some management teams also committing multi-million pound sums to their own trusts.
Baillie Gifford’s James Anderson and Tom Slater, the managers behind the £5 billion Scottish Mortgage Investment Trust, have by far the biggest stake at £54m, with the seven managers who run the £1.3bn Aberforth Smaller Companies Trust invetsing £32.5m between them. The same team invest £12m in the £252m Aberforth Geared Income Trust.
Other managers with large investments include Malcolm Scott and Russell Napier at Mid Wynd (£3.6m and £1m respectively) and Harry Nimmo at Standard Life UK Smaller Companies (£1.4m).
For Jason Hollands, managing director of financial services firm Tilney Bestinvest, while managers will be restricted in their ability to deal in their funds because, by definition, they hold inside information, the fact that some take large positions in their own vehicles should be of comfort to other investors.
“It’s a good sign when a chef eats in their own restaurant and likewise we take it as a positive when we see that fund managers have a personal stake in the investment trusts or funds they manage, as it creates a personal alignment between their interests and those of other investors to deliver good returns,” he said. “And if they falter, they are sharing in the pain too.”
That said, Mr Hollands noted that there may be “good personal reasons” for managers or directors not investing directly in the trust they represent, meaning care must be taken in “automatically dismissing trusts where the manager does not appear to have a big holding”.
“It could be because the remit doesn’t suit their objectives, they aren’t personally wealthy or they may need to sell shares to fund [something like] a divorce,” he added.
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