Investment trust ‘skin in the game’: one in 10 directors don’t invest

While it’s become more commonplace for investment trust board members to align their interests with shareholders, there’s still plenty of room for improvement as one in 10 directors have no personal investment.

Those figures are detailed in Investec’s latest Skin in the Game report, which examined 249 investment trusts. The report found that a total of 13.4% of directors had no personal investment in the trust they oversaw. However, excluding those who’d been appointed within the last year (meaning they may not have purchased yet), that figure fell to 8.2%.

• Invest with ii: Open an ISA | ISA Investment Ideas | Transfer a Stocks & Shares ISA

Drilling further into the data, 10 chairs (4.0% of those featured) at Oryx International Growth (LSE:OIG), New Star Investment Trust (LSE:NSI), Chelverton UK Dividend Trust (LSE:SDV), Baker Steel Resources (LSE:BSRT), Geiger Counter (LSE:GCL), PRS REIT (LSE:PRSR), Alternative Income REIT (LSE:AIRE), Fair Oaks Income (LSE:FAIR), Ecofin US Renewables Infrastructure (LSE:RNEW) and Regional REIT (LSE:RGL) have no investment in their company. The latter two trust chairs were appointed in 2024 and 2025.

For 27 investment companies, the aggregate shareholding of the board is worth less than the total fees received over six months.

However, the report notes that having some “skin in the game” has “become the accepted norm”. This is reflected in the disclosed aggregate investment by boards and managers increasing from £687 million in 2010 (when the report was first published) to £5.7 billion in May 2025.

The report says: “For those board members with no investment (after an initial grace period), this stance does not sit easily with the degree of commitment now expected by most shareholders.

“We have certainly come a long way since our first report, when the views of many were summed up by one offshore director who berated us after publication, saying ‘I’m on so many boards, I couldn’t possibly have an investment in all of them!’”

In total, 18 investment trusts (7.2%) have boards where all directors have shareholdings valued at more than one year’s fee. Those trusts are: Ashoka India Equity (LSE:AIE), AVI Global Trust (LSE:AGT), Baillie Gifford US Growth (LSE:USA), BlackRock Frontiers (LSE:BRFI), Brunner (LSE:BUT), CC Japan Income & Growth (LSE:CCJI), Chenavari Toro Income Fund (LSE:TORO), Cordiant Digital Infrastructure (LSE:CORD), CT Private Equity Trust (LSE:CTPE), Ecofin Global Utilities & Infrastructure (LSE:EGL), Fidelity European Trust (LSE:FEV), India Capital Growth (LSE:IGC), Invesco Global Equity Income Trust (LSE:IGET), Literacy Capital (LSE:BOOK), Rockwood Strategic (LSE:RKW), Schroder Asian Total Return (LSE:ATR), Tetragon Financial (LSE:TFG) and UIL (LSE:UTL).

• Time to be bullish or bearish? Five pros give their take
• Fund managers’ favourite UK smaller companies

Numbers for fund manager skin in the game are harder to quantify as there is no requirement for disclosure unless managers hold more than 3% of shares. However, where possible, the report did identify management and management teams with large stakes in the trust they manage. A total of 40 managers or teams have more than £10 million invested, while an additional 47 have between £1 million and £10 million.

The largest investment by a fund manager is at Pershing Square Holdings (LSE:PSH), where the manager’s shareholding is valued at £1.76 billion. The name is not disclosed, but the manager at the helm is Bill Ackman. In second and third place are management teams at Tetragon Financial Group and Apax Global Alpha (LSE:APAX), which have respective holdings of £338 million and £206 million.

Popular investment trusts among interactive investor customers that have significant skin in the game include Scottish Mortgage (LSE:SMT), Greencoat UK Wind (LSE:UKW), F&C Investment Trust (LSE:FCIT) and City of London (LSE:CTY), with management stakes totalling £11 million, £6.5 million, £2.2 million and £1.5 million.

• What’s behind more investment trusts joining forces?
• Activist pressure prompts investment trust to turn into an ETF 

The report also sheds light on how boards have become much more diverse, shrugging off criticism of being “pale, male and stale”. Over four in 10 (43.8%) investment trust directorships are held by women, compared to just 8.0% in 2010. Meanwhile, the number of all-male boards has fallen from 159 in 2010 (almost two-thirds of Investec’s original survey), to just 12 (or 4.8%), and many of these companies are facing existential challenges. In addition, 64% of investment trusts now have at least one individual from a minority ethnic background, compared to 29% in May 2023.

Investec says: “Personal share ownership by boards and investment managers sends a clear and powerful message to both existing and potential investors. With the investment company industry enduring a perfect storm, with discounts stressed and close to levels last seen during the global financial crisis, this alignment of interest is even more important in helping to underpin investor confidence.

“Meanwhile, we find that there has been significant progress in improving board diversity, both in terms of female and ethnic minority representation.”

Skin in the game – does it matter?

One of the differences between funds and investment trusts is that the latter typically has an independent board of directors overseeing it and ensuring it’s managed according to shareholders’ interests.

In most cases, the directors will appoint an external fund manager to run the trust. If the manager doesn’t do a good job, the board can replace them. Boards can also help drive down fees, with many trusts having a charging structure in place that lowers fees when assets grow in order to pass on economies of scale.

My personal view is that it’s important for investors to know whether their fund manager is eating their own cooking. It’s why, for years, we have asked every manager we interview whether they personally invest in the fund or investment trust they oversee.

The vast majority of managers in our Insider Interview video series have said they do have their own money invested, meaning they share both the good and bad times with investors. 

• Is US stock market exceptionalism over?
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Moreover, a manager stake can offer reassurance that they are confident in their own abilities and optimistic about the future prospects for the investment trust.

For fund managers who own less than 3% of shares and are therefore not obligated to disclose any holdings, there’s a counter-argument that this is a personal matter.

Context, of course, is important, with a percentage of overall wealth the best measure of how much skin in the game is invested. In addition, the fund’s strategy or asset class may not be appropriate for the manager’s own investment goals or risk appetite.

However, bear in mind that skin in the game is no panacea and does not guarantee success. Instead, it simply aligns an individual's interests with investors, which arguably sends a powerful message to existing shareholders and potential new ones.

Yet there is also a risk of having too much skin in the game, which can lead to bad outcomes, such as poor shareholder governance. It could also encourage excessive, or too little, risk-taking.