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Independent directors delivering value for investment companies

11 October 2018

The Association of Investment Companies said investment companies with an independent board of directors are leading the way on governance which sets it apart from the open-ended industry. 

At a roundtable hosted by the AIC, a number of directors highlighted the role of investment company directors and gave examples of how their boards have acted to deliver value for shareholders in recent years.

Richard Gubbins, chairman of Henderson Alternative Strategies Trust described the board’s key responsibility as the overall governance of company, ensuring that those who have been given responsibility undertake it in a way that contributes to the long-term success of the company. According to Gubbins, shareholders benefit from the experience, expertise and challenge that directors bring to the role in making sure the investment trust remains an attractive investment opportunity.

When asked how boards deliver shareholder value, Clare Dobie, director of Alliance Trust, said the board of Alliance Trust had transformed the £3bn trust by introducing a new investment approach, changing manager and streamlining the corporate structure in addition to fending off an activist investor.

“It has set a demanding performance target for the equity portfolio, which is it in line to meet. In summary, it has undertaken a radical overhaul of a 130-year old investment trust for the benefit of shareholders,” she added.

Gay Collins, director of JPMorgan Global Growth & Income, said its job has been to make the trust appeal to more investors in a post RDR-landscape.

Collins explains: “Part of that relates to size and liquidity, and when we were a sub £200 million market cap trust we were going nowhere. The decision to move to be a total return focused trust through increasing the distribution policy whilst retaining the same fund manager and style was a watershed moment for the trust. This was driven by the board and in particular our chairman.”

Chairman of Allianz Technology (ATT) Robert Jeens said boards should pay close attention to the discount/ premium to NAV at which the company’s shares trade and make the decision to buy in shares or issue new shares where it’s in the best interest of shareholders. Jeens also said setting fees was a key role for the board, aiming to strike a fair balance between minimising the cost to shareholders and making sure the investment manager is appropriately incentivised to deliver the best investment performance.

Looking ahead, Collins said diversity was set to play an important role within independent boards, with more women becoming involved and the experience and background of directors changing.
“Many more of us come from a marketing or PR background and I feel that adds an extra dimension in terms of pushing for sales and marketing initiatives. Funds are sold not bought and investment trusts need to up their game,” she added.

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