Last week my colleague Frank Buhagair wrote an excellent summary of the new Peoples Trust investment fund launch. You can see it here – http://www.adventurousinvestor.com/239-the-peoples-trust-power-to-the-people. I’m not proposing to go over the core investment proposition again today but I do want to explain why I think this new fund could be a core investment for the right investor.
The proposed Peoples Trust – very much the brainchild of Daniel Godfrey – sits in an important subsection of the investment trust market: along with Alliance Trust and Witan it is an effective all-rounder fund for those looking for long-term equity investment. Alliance Trust used to be a very different creature, managing its own money and mandates but after the recent changes its now essentially aping the Witan way of investing. This consists of picking a short list of talented active equity stockpickers – via segegrated mandates based on the advice of investment consultant firm Towers Watson. At Witan, Andrew Bell also uses that consulting advice from Towers Watson and then dials up and down his allocation to a particular manager based on their ‘alpha’ – their active outperformance of the benchmark. Because of Alliance Trust’s size its fees are lower than Witan but the difference is probably fairly marginal in the great scheme of things. The more pertinent point for me is that Andrew Bell and Witan have been running their multi-manager approach for many years now, and we can properly judge whether he’s any good at picking the right fund manager – based on the last few years we can answer in the affirmative. Crucially Andrew also tops up his core managers with a small portfolio of direct holdings.
So, for me, until Alliance Trust can prove its model, my default choice between Witan and AT, would be the former.
Enter The Peoples Trust. This has a great many similarities with both Witan and AT. It’s using investment consulting firm Towers Watson to inform the fund selection process. It’s also negotiating what one hopes are tight fee arrangements with the core managers. And it’s trying to keep fees low, though inevitably at launch it’ll be more expensive given its putative size.
There are though some crucial differences with Witan.
The first is that the core managers chosen by Daniel are, fairly obviously, very different than those used by Witan. Some of the names in the shortlist I know well, others less so. They all sound impressive – but the point is that you have a different bunch of underlying managers than Witan. One core observation – Witan does have a significant exposure to direct emerging market equities, whereas The Peoples Trust is overwhelmingly developed markets focused. Also, the People’s Trust has an explicit commitment to investing some money at the start to clean energy stocks – Witan has no such explicit commitment.
Next up, The People’s Trust has also signed up these managers for the long term – for seven years. This underlines its commitment to the long term. Witan by contrast – along with AT – is likely to take a more active and tactical approach to firing and hiring managers. That can both be an advantage and a disadvantage. The advantage is that you are constantly watching those returns for evidence of alpha. The disadvantage is that the managers might end up taking a more short-term approach.
The People’s Trust is also trying to sell a more holistic view of investing. Witan is, in essence, a fairly straightforward vehicle for those who want an active alternative to a global equities ETF tracker. The People’s Trust, by contrast, is much more interested in corporate sustainability and governance and has an explicit target of investing (a small sum) in more sustainable investments through the Big Issue Investment team. The Alliance Trust has also made similar statements and I think for many investors this focus on long-term, sustainable investing will be hugely attractive. Also, there’s much to admire about the People’s Trust evangelical zeal for the mutual business structure, for sustainable investing and for making investment more engaging. Witan, by contrast, feels more straight down the line, with one specific task business task – beating the key global equity indices – and that’s it.
In sum, I think The People’s Trust is a cracking idea that for many investors, especially those interested in sustainable, long-term investing – for these investors the People’s Trust could well be a core investment. That doesn’t mean that I wouldn’t invest in its most direct competitor Witan – both could sit quite happily in a core portfolio. In fact, I would go so far as to suggest a slightly exotic strategy – if you really do think that active fund managers can add value when compared with global, diversified ETFs, why not build a blended core portfolio featuring not only the Peoples
In fact, I would go so far as to suggest a slightly exotic strategy – if you really do think that active fund managers can add value when compared with global, diversified ETFs, why not build a blended core portfolio featuring not only the Peoples Trust, but also Witan and Alliance Trust? My hunch is that each fund will have its own biases and idiosyncrasies but by combining all three you’ll probably be accessing a selection of the very best active fund managers currently operating in the UK today. For me, thats a much better idea than paying some remote discretionary fund manager via your IFA to manage your money!
If you are interested in The People’s Trust then hurry along and visit its website at https://www.thepeoplestrust.co.uk/.
The offer for subscription is currently open but closes 10th October.