Rathbone Unit Trust Management’s (Rutm) David Coombs has slammed investment trust boards for their “cosy club” image.
By Jenna Voigt | Published Jan 09, 2012
Article from FT Adviser
Mr Coombs, head of multi-asset investments at Rutm, said investment trusts had the “potential” to outperform their unit trust counterparts, but he warned “the industry needs to focus on investors and restructure in order to ensure more alignment of interests”.
He critcised investment trusts for under-representation from wealth managers on their boards, saying this called into question their objectivity.
“In many cases, the non-executive directors are drawn from the asset management community (sellers) rather than wealth management (buyers), which is odd considering they are supposed to be representing the interests of shareholders,” he said.
“This opens up the accusation of a ‘cosy club’. I’d go so far as to say the status quo is not independent enough.”
He added there was a lack of investment trust managers willing to take on risk and warned many investment trusts suffered from illiquidity.
Mr Coombs said boards needed to focus on shareholder interests and aim to promote funds in the secondary market, rather than focusing on taking front-end fees in the primary market.
But he said investment trusts remained appealing because they have lower fees and are more protected from large inflows or outflows which may constrain the performance of unit trusts.
Article from FT Adviser
