The People’s Trust: Daniel Godfrey responds
Posted by Robin Powell on September 12, 2017
I wrote the other day about the People’s Trust, a new investment trust, run by Daniel Godfrey, the former head of the Investment Association.
I am absolutely not opposed to active fund management as a matter of principle. Active managers play an important function in setting prices. But I am extremely sceptical about the value provided by the vast majority of active funds available to investors today, and I doubt very much whether the People’s Trust will outperform the market over the long term.
That said, I applaud much of what Daniel stands for, particularly the need to counter what he calls the “plague of short-termism” in the investment industry. I also have great respect for Daniel for the pro-consumer stance he took at the IA, which effectively cost him his job.
For those reasons, therefore, I’ve invited him to reply to what I had to say. Here is his response:
“The Evidence Based Investor’s take on The People’s Trust’s launch raises some fundamental issues concerning the future of investment.
“The stakes could not be higher. Investment is incredibly important for investors. But it also holds the keys to corporate behaviour and its impact on innovation, people, the planet and productivity growth.
“The People’s Trust is really a very simple proposition:
· Find companies that are capable of sustainable wealth creation over long periods of time
· Invest in them for the long-term (we have a seven-year objective and seven-year contracts for our managers)
· Undertake stewardship to help them stay on track and improve wherever possible
“Success, in the long-term can only mean that we have happy Shareholders and companies have a better impact on society.
“The one criticism that seems to stick to The People’s Trust is that we are expensive. I would say is that we are not a penny more expensive than we need to be. And, because we have no commercial backers, as we grow, all the economies of scale that we can capture just bring costs down. There is literally nowhere else for them to go.
“Robin understandably looks at the investment management industry and recognises a deeply dysfunctional model. Looking at that model, he is right to argue that intelligent investors would be better off with passive funds.
“However, we can do better by developing a new model of high-conviction, long-term, low-turnover investment in sustainably wealth creating companies. Success should deliver good absolute returns, better returns than markets with a lower risk to permanent loss of capital and a better impact on society – what’s not to love?
“So, more expensive than an index fund? Yes. More expensive than many active funds? Yes, but we’ll bring down costs for investors as we get bigger.
“Robin is right, there needs to be even more radical change – his “giant leap”. I think we have done an amazing job of preserving the integrity of the purpose of sustainable wealth creation. But over the long-term and when we become a £multi-billion fund, The People’s Trust will have the buying power to be a catalyst for that leap.
“So the right questions are:
1 Is the investment objective attractive to me?
2 Do I think they have the capabilities to deliver on that objective, after costs?
“If the answer to those questions is “yes” then maybe it’s worth giving something different a go? Take an open-minded look at our prospectus and decide for yourself.”
Here’s my original post: