With all investments, we can, usually, rely on additional checks and balances on funds to ensure they live up to their requirements. One of the key attractions of an investment trust is in the multiple layers of governance on offer, the type that can help you sleep at night. This high level of governance, in the form of an independent Board tasked solely with protecting shareholders and speaking on their behalf, is one of the key benefits on offer from the investment trust sector.
In a nutshell, the Board will seek to ensure the company is run in the best interests of shareholders at all times and seek to protect their interests. It holds those employed by the trust to account and ensures the investment manager is fulfilling their duties.
The benefits to shareholders of the trust are wide-ranging. The Board will monitor fees and charges, pushing to keep levels competitive. It will monitor if the share price falls to a discount, or rises to a premium and where necessary manage this through share buybacks or issuance. It will ensure the funds over which the investment manager has responsibility are not abused, with appropriate risks monitoring and processes followed. It is also able to hold the investment manager to account over performance, raising concerns and asking the important questions if it trends downwards.
The Board also brings together a wide range of professionals with different talents and areas of expertise. From risk and compliance to marketing and sustainability, each Board member will bring a different specialism gained from real-world experience across different industries and sectors. The breadth and depth of knowledge on offer is invaluable, ensuring the trust has an expert voice on a range of topics to help it achieve its ambitions and goals.
Nowhere has the power of a strong, independent Board been demonstrated clearer than in the transformation of Alliance Trust in recent years.
It set about overhauling a number of key areas, changing the trust from top to bottom. It overhauled the investment approach, bringing in a new manager and with it an entirely new investment process built on a multi-manager approach to global equities. This new equity portfolio, which saw old legacy investments in the likes of mining disposed of, is managed by global asset management house Willis Towers Watson and was set a demanding performance target. The entire corporate structure was also streamlined and updated. The Board completed all of this while ensuring that the 130-year-old Trust continued to pay shareholders an increasing dividend each year. The work was ambitious and purely for the benefit of shareholders, a clear sign of the professional oversight and care taken to future-proof the trust for generations to come.
The Board’s decision to appoint of global asset manager Willis Towers Watson is in itself a bonus for shareholders. With the investment team comes access to a specialist global organisation’s research, tools, and equity expertise. They in turn appoint and manage the underlying stock pickers for the trust, monitoring performance, allocating capital, and holding them to account on decisions affecting the overall portfolio. As an extra layer of defence, the Board and Willis Towers Watson have also employed the services of EOS at Federated Hermes, a leading stewardship service provider, to offer support on all matters concerning sustainability and the ESG considerations of the portfolio’s assets.
It really does take a village, as the old adage goes. At a time when the risks of relying on one person, or one manager, to carry the fortunes of a fund or company have never been more apparent, it is timely to consider the multi-faceted support on offer via investment trusts. When combined, the different arms of the Alliance Trust management – all overseen by the Board – create a veritable army of experts dedicated to ensuring the company runs as smoothly and successfully as possible. With a Board acting as a conduit for shareholders, giving them a voice in decisions and watching out for their wellbeing, Alliance Trust is truly a trust for the long-term.
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