Interactive Investor

‘Skin in the game’ disclosure from Super 60 and ACE 40 fund managers

11th October 2021 12:58

Jemma Jackson from interactive investor

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Investors deserve to know whether fund managers eat their own cooking, says interactive investor.

  • 77 funds and investment trusts (94% of ii’s rated lists) have fund manager skin in the game, although of these, fund groups representing 49 funds and trusts prefer not to say how much
  • 20 funds and trusts (24% of ii’s rated lists) have managers with over £1m of their own money invested

In June 2021, interactive investor, the UK’s second largest direct-to-consumer investment platform and number one flat-fee provider, called on the FCA to introduce rules requiring fund managers to say how much they have invested in the funds and investment trusts they manage.

Since then, ii has been polling the active managers of its Super 60 and ACE 40 rated funds, requesting this ‘Skin in the Game’ disclosure, covering 82 funds and investment trusts in total.

interactive investor has published the responses* it has received in the tables below.

Richard Wilson, CEO, interactive investor, says: “Fund managers have an enormous responsibility because they power the nation’s pensions and ISAs. The best managers  are celebrated and closely followed by a loyal army of private investors. Whether household names or otherwise, we think it only right that fund managers have an open relationship with their investors and disclosing skin in the game is an important issue of transparency. We have made this point to the FCA, but as a platform with two flagship rated lists, today’s research is our way of making swift progress in this area.”

Moira O’Neill, Head of Personal Finance, interactive investor, says: “The big positive is that over a third (36%) of fund managers from our active rated lists constituents, which include some of Britain’s biggest, best known and most widely held investment trusts and funds, were happy to go on record about the extent of their skin in the game. And that’s without any regulatory requirement to do so.

“This is clearly an emotive or uncomfortable issue for many fund management groups in the UK. But we don’t ask for the sake of it -  our customers have said that they want this information. Investors deserve to know whether fund managers eat their own cooking. In the US, ‘Skin in the Game’ is motherhood and apple pie - for years the SEC has required this disclosure, and the UK compares unfavourably.”

Groups representing 77 funds and investment trusts (94% of ii’s actively managed rated list constituents) said that fund managers had skin in the game, although 49 of these (60%) preferred not to say how much.

See Table 1 for more information breakdowns.

See Table 2 for full list of responses to our request for information.

Moira O’Neill, Head of Personal Finance, interactive investor, adds: “In our recent survey  almost nine in 10 ii customers (88%) thought it should be mandatory for fund managers to disclose their interests in funds they manage.

“What’s more, nearly eight in 10 (77%) customers said they would be more likely to buy a fund or trust if the manager holds a personal interest, so it’s in their interests to increase transparency and engagement with investors.

“We believe the FCA should take steps to ensure that the transparency gap is addressed so investors can make better informed investment decisions. Fund managers should not be compelled to invest in their own funds – that is their choice. And we would not consider non-disclosure alone a reason to eject a manager from our rated list – it is not a regulatory requirement. But we believe in this instance, the UK is miles behind the US and so we want to set an example on this issue.”

Dzmitry Lipski, Head of Fund Research, interactive investor, says:

“Funds tend to be viewed positively by investors where the manager and the team ‘eat their own cooking.’ Manager ownership can indicate commitment to investors and alignment of interests, although there are other schools of thought too: 11% of our research sample thought fund manager skin in the game can create a conflict of interest and encourage fund managers to take either too little or too much risk.

“Ownership stakes should not be analysed in isolation but alongside other criteria to establish extent of alignment of interest such as firm structure and incentives to link fund manager pay with long term performance objectives.

“Looking at manager ownership across the ii rated funds, ownership stakes vary and, as you would expect, depend on investing asset class, market and sector. We hope that more groups come forward on this issue.”

Table 1: Full breakdown of responses:

Total asked

82 Funds and investment trusts

 
     

Investment

Number

Percentage of total asked

Invested in Fund

77

93.90%

Not invested in fund

3

3.66%

Prefer not to say

2

2.44%

     

Amount

Number

Percentage of total asked

Below £50,000

2

2.44%

Between £50,000 and £100,000

0

0.00%

Between £100,000 and £500,0000

4

4.88%

£500,000 and £1m

4

4.88%

Over £1m

20

24.39%

Not invested

3

3.66%

Prefer not to say

49

59.76%

Table 2: The groups that have responded to our request for information are:

Fund Name

Fund management group name

Skin in the game? Y/N

Amount

ASI Europe ex UK Ethical Equity Fund

abrdn

Y

Prefer not to say

Standard Life Private Equity Trust**

abrdn

Y

Prefer not to say

Murray International Trust

abrdn

Y

Prefer not to say

ASI Global Smaller Companies Fund

abrdn

Y

Prefer not to say

 

 

 

 

Aegon Ethical Equity Fund

AEGON

Y

Prefer not to say

 

 

 

 

Artemis US Smaller Companies Fund

Artemis

Y

Prefer not to say

Artemis SmartGARP Global Equity Fund

Artemis

Y

Prefer not to say

Artemis Monthly Distribution Fund

Artemis

Y

Prefer not to say

 

 

 

 

Baillie Gifford Global Stewardship Fund

Baillie Gifford

Y

Prefer not to say

Baillie Gifford Positive Change Fund

Baillie Gifford

Y

Prefer not to say

Baillie Gifford Responsible Global Equity Income Fund

Baillie Gifford

Y

Between £500K - £1m

Scottish Mortgage Trust

Baillie Gifford

Y

>£1m

Baillie Gifford Shin Nippon Trust

Baillie Gifford

Y

Prefer not to say

 

 

 

 

BMO Responsible Global Equity Fund

BMO

Y

Prefer not to say. BMO GAM does not usually disclose managers investments in their own funds[1] as we believe this may be misconstrued or could even mislead investors.

 

For example. a named manager may manage, as part of the team approach, multiple funds (e.g. managing a range of Fund such as BMO Sustainable Universal MAP). In doing so, and to meet the manager’s own risk profile of their own personal portfolio, they may invest in some funds yet not others.

 

This, incorrectly, may lead some to question the managers commitment to some of the funds they manage.

 

We believe managers personal investments should be considered personal. Like any investor, their investment in a fund may change from time to time, due to personal reasons, and we do not expect that to have to be explained.

 

Most investors understand managers have an inherent ‘skin in the game’ even if a personal investment is not disclosed for personal reasons.

 

  1. For investment Trust disclosures, please refer to the Company’s annual report

BMO Responsible UK Income Fund

BMO

Y

BMO Sustainable Universal MAP Balanced Fund

BMO

Y

BMO Sustainable Universal MAP Cautious Fund

BMO

 

BMO Sustainable Universal MAP Growth Fund

BMO

 

TR Property Trust

BMO

Y

F&C Investment Trust

BMO

Y

BMO Commercial Property Trust

BMO

Y

 

 

 

 

Brown Advisory US Sustainable Growth Fund

Brown Advisory

Y

Prefer not to say

 

 

 

 

Capital Gearing Trust

CG Asset Management

Y

Over £1m

 

 

 

 

Threadneedle UK Social Bond Fund

Columbia Threadneedle

Y

Prefer not to say

 

 

 

 

CFP SDL UK Buffettology Fund

Sanford DeLand

Y

Over £1m

 

 

 

 

ES R&M UK Recovery Fund

River and Mercantile

Y

Over £1m

 

 

 

 

Fidelity Multi Asset Income Fund

Fidelity

Y

Prefer not to say

Fidelity Global Dividend Fund

Fidelity

Y

Prefer not to say

Fidelity China Special Situations Trust

Fidelity

Y

Prefer not to say

Fidelity Asia Fund

Fidelity

N

OEIC status restricts ownership from non resident investors outside the UK.

 

 

 

 

Legg Mason IF Japan Equity Fund

Franklin Templeton

N

Strategy registered for distribution only in the UK

Legg Mason IF ClearBridge Global Infrastructure Income Fund

Franklin Templeton

N

As UK domiciled but investment team hold undisclosed amount in broader strategy assets

 

 

 

 

 

 

 

 

Fundsmith Sustainable Equity Fund

Fundsmith

Y

Over £1m

Fundsmith Equity Fund

Fundsmith

Y

Over £1m

 

 

 

 

FP Foresight Global Real Infrastructure Fund

Foresight Group

Y

Below £50,000

 

 

 

 

GAM Star Credit Opportunities Fund

GAM

Y

Over £1m

 

 

 

 

Impax Asian Environmental Markets Fund

Impax

Y

Prefer not to say

Impax Environmental Markets Trust

Impax

Y

Bruce Jenkyn-Jones: Between £100,000 and £500,000

Jon Forster: Between £50,000 and £100,000

 

 

 

 

 

Liontrust Sustainable Future Corporate Bond Fund

Liontrust

Y

Prefer not to say

Liontrust Sustainable Future European Growth Fund

Liontrust

Y

Prefer not to say

Liontrust UK Ethical Fund

Liontrust

Y

Prefer not to say

Liontrust Special Situations Fund

Liontrust

Y

Prefer not to say

 

 

 

 

Man GLG Income Fund

GLG Partners

Y

Prefer not to say

Man GLG Continental European Growth Fund

GLG Partners

Y

 

 

 

 

Guinness Asian Equity Income Fund

Guinness

Y

Between £100k - £500K

 

 

 

 

 

 

 

 

Utilico Emerging Markets Trust

ICM Limited

Y

Over £1m:  Holding by ICM (joint portfolio managers)924,193 UEM shares, Holding by Charles Jillings (fund manager) 244,500 UEM shares, Holding (indirect) by Duncan Saville (ICM director) 26,620,967 UEM shares(by way of his 74.3% interest in UIL Limited which holds 35.8m UEM shares)

 

 

 

 

Janus Henderson UK Responsible Income Fund

Janus Henderson

Y

between £100,000 - £500,000

TR European Growth Trust

Janus Henderson

Y

between £500k - £1m (fund manager)

Henderson Smaller Companies Trust

Janus Henderson

Y

>£1m (fund management team)

City of London Trust

Janus Henderson

Y

>£1m (fund manager)

 

 

 

 

JPMorgan European Income Pool Trust

JPMorgan

Y

Prefer not to say. Mandatory Investor Plan (MIP awards) provide for a rate of return equal to that of the funds that the Investors manage. The goal of the MIP is to align the Investors’ pay with that of their client’s experience and to provide a direct link between how the Investors perform to how they are paid. 100% of the Investor’s long term incentive compensation is eligible for the MIP and depending on the level of compensation, 20% or 50% needs to be in invested in the specific fund they manage as determined by their respective Investment Committee member. The remaining portion of the overall amount is electable and may be treated as if invested in any of the other funds available in the plan or can take the form of RSUs. MIPs are subject to a two and three-year vesting schedule and the employee generally must be employed by the Firm at the time of vesting.)

JPMorgan Emerging Markets Trust

JPMorgan

Y

 

 

 

 

Jupiter Strategic Bond Fund

Jupiter

Y

Prefer not to say

Jupiter Merian North American Equity Fund

Jupiter

Y

Prefer not to say

 

 

 

 

Lindsell Train Japanese Equity Fund

Lindsell Train

Y

Over £1m (Michael Lindsell)

LF Lindsell Train UK Equity Fund

Lindsell Train

Y

Over £1m (Nick Train in Finsbury Growth & Income Trust (but not the LF Lindsell Train UK Equity Fund). The two products (the OEIC and investment trust) are managed in tandem, the investment strategy implemented in exactly the same way for both, and they have broadly similar portfolios. So, we hope this demonstrates commitment to “skin in the game” to investors in either product).

 

 

 

 

 

 

 

 

M&G Global Macro Bond Fund

M&G

Prefer not to say

Fund managers may invest in their own funds if they wish to – there is no requirement that they have to. For confidentiality we do not disclose details of such investments. Compensation policies are designed to align manager incentives with the long-term performance of funds.)

 

Fund managers can and do invest in their own funds if they wish to and their renumeration is aligned with the long-term investment outcomes of their customers.  We will not disclose this on an individual basis due to personnel confidentiality.

 

M&G Emerging Markets Bond Fund

M&G

 

 

 

 

Marlborough Multi-Cap Growth Fund

Marlborough

Y

Over £1m

Marlborough Global Bond Fund

Marlborough

Y

between £500,000 and £1m

 

 

 

 

Mobius Investment Trust

Mobius

Y

Over £1m

 

 

 

 

Montanaro Better World Fund

Montanaro

Y

The two Fund Managers, together with Montanaro Asset Management, own more than £5 million in the Better World Fund (and a similar amount in the LF Montanaro Better World Fund).  Montanaro staff also have investments in the Fund through a 3-year Loyalty Bonus scheme

 

 

 

 

Morgan Stanley Global Brands Equity Income Fund

Morgan Stanley

Y

Prefer not to say (Our investors have substantial amounts in the funds they run but we don’t disclose monetary amounts. a portion of investors compensation must also be invested in the products they run to align themselves with our clients)

 

 

 

 

Climate Assets Fund

Quilter Cheviot

Y

between £500,000 and £1m

 

 

 

 

TM CRUX European Special Situations Fund

CRUX

Y

Over £1m

 

 

 

 

PIMCO GIS Global Bond ESG Fund

PIMCO

Y

Prefer not to say

 

 

 

 

Premier Miton US Opportunities Fund

Premier Miton

Y

Prefer not to say

Diverse Income Trust

Premier Miton

Y

Prefer not to say

 

 

 

 

Rathbone Ethical Bond Fund

Rathbone

Y

Prefer not to say

 

 

 

 

Royal London Ethical Bond Fund

Royal London

Y

Prefer not to say

Royal London Sustainable Diversified Fund

Royal London

Y

Prefer not to say

Royal London Sustainable Leaders Fund

Royal London

Y

Prefer not to say

Royal London Sustainable World Fund

Royal London

Y

Prefer not to say

Royal London UK Equity Income Fund

Royal London

Y

Prefer not to say

Royal London Sterling Extra Yield Bond Fund

Royal London

Y

Prefer not to say

Royal London Global Bond Opportunities Fund

Royal London

Y

Prefer not to say

 

 

 

 

Pacific Assets Trust

Stewart Investors

Y

Over £1m

Stewart Investors Global Emerging Markets Sustainability Fund

Stewart Investors

Y

Over £1m

 

 

 

 

Syncona Trust

Syncona

Y

Over £1m

 

 

 

 

TB Amati UK Smaller Companies Fund

Amati

Y

The investment team and wider Amati team have considerably more than £1m in the fund

 

 

 

 

Trojan Ethical Income Fund

Troy Asset Management

Y

Between £100,000 and £500,000

 

 

 

 

Unicorn UK Ethical Income Fund

Unicorn

Y

Simon Moon & Fraser Mackersie confirmed they both individually have £100k-£500k invested in the Unicorn UK Income strategy with <£50k in the Ethical Fund specifically. Both have further significant investments in other Unicorn funds they manage.  

 

 

 

 

VT Gravis Clean Energy Income Fund

Valu-Trac

Y

prefer not to say

 

 

 

 

Vanguard LifeStrategy 80% Equity Fund*

Vanguard

Y

78 person manangement team for equity index funds and unable to disclose specific details due to confidentiality, however company pledge to clients to invest own money alongside theirs (can be any Vanguard fund)

Vanguard LifeStrategy 60% Equity Fund*

Vanguard

 

Vanguard LifeStrategy 20% Equity Fund*

Vanguard

 

*ii spoke to Vanguard as well as its active rated list constituents, knowing that despite being a passive-strategy fund management group, they have a policy to invest alongside their customers.

Notes to editors

Interactive investor received responses from 1,888 website visitors between 2-4 June 2021 on their views on Skin in the Game.

*Interactive investor gave fund managers a range of skin in the game bands to select, based on data as at 31 May 2021.

  • Below £50,000
  • Between £50,000 and £100,000
  • Between £100,000 and £500,0000
  • £500,000 and £1m
  • Over £1m
  • Prefer not to say

** Standard Life Private Equity Trust is not on Super 60, but is an ii rated fund, forming part of ii’s Active Income model portfolio.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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