Bill Jamieson: Why People's Trust may struggle to thrive
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Look no further than The People’s Trust being launched by former Association of Investment Companies director-general Daniel Godfrey. It is a noble venture, and Mr Godfrey is nothing if not ambitious. He aims to raise £100 million this September. And within five years he hopes it will be a multi-billion pound global investment trust, putting it among the UK’s biggest.
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Hide AdThe investment portfolio will be spread across five leading fund management companies including Artemis, First State and JO Hambro. But The People’s Trust’s unique selling point will be its commitment to “social” investment. The trust will also be investing in a portfolio of “social impact” investments managed by Big Issue Invest, the social investment arm of The Big Issue Group. This will start by looking after 1 per cent of the fund, potentially rising to a maximum of 5 per cent.
“This is not”, says Mr Godfrey, “a charitable donation, but rather an investment into projects that should generate social impact as well as modest, steady financial returns. It will largely comprise investments into social enterprises and charities dealing with some of the most difficult issues of deprivation in the UK.”
He adds: “The People’s Trust has a clear purpose: better returns for investors and a better impact on society. Our objective is long-term, cumulative total return, measured over rolling seven-year periods.”
Such a prospectus will appeal to many, particularly younger, investors, as well as academic, religious and charitable groups. Interested investors are invited to become founders to help the trust get off the ground with a small discount on the share price when the trust floats in September. You can join as a founder for £20 (£10 for under-35s) up to 31 July.
So far the trust has attracted more than 2,300 founders and over £100,000. But, for me, it prompts three concerns. First, it may encourage an approach that “social impact” investment is a separate and distinct sub-specie of the investment universe as a whole; “good behaviour” investment need not impact or constrain the corporate universe as a whole.
The second related concern is the assumption that “good” or “ethical” or “social” behaviour are somehow additional add-ons and cannot inhere in everyday business. A successful and growing business by itself, conforming to law and regulation, is per se a “social” good.
I often bridle when I hear the demand, for example, that “business should be made to contribute more to their communities and society on which they depend for taxpayer provided public services and utilities”. But very often the communities owe their very existence to the clusters of businesses that provide income and employment.
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Hide AdThe core activity of business is thus per se “social”, and the sustainability of business a consequence of choice by consumers: a democratic market validation.
And third, there are several well-known global trusts and funds also offering professional investment management (Standard Life, Alliance, Witan, Scottish Mortgage) with notable commitment to high standards of corporate governance. They are as much “The People’s Trust” in vigilance if not in name. Many will welcome an alternative to the “quarterly capitalism” and obsession with short term returns. But The People’s Trust may be a hard sell given the range of responsibly managed funds already on offer.
Market myth
“Sell in May and go away,” the stock market adage has it. It argues that investors should sell in summer months because they are usually the worst performing and hold cash until the St Leger horse race in early September.
It harks back to a time, now long ago, when the stock exchange was a homogeneous clique with similar wealth and lifestyles who could take time out for sporting events, such as Wimbledon, the Royal Regatta at Henley and Royal Ascot.
But data analysed by Schroders offers a mixed picture of this famed market superstition. Since 1986 the FTSE 100 has, on average, fallen a fraction between mid-May and mid-September – while the FTSE 250 has typically risen.
The summer period has also produced more positive years than negative ones. In the 31 years since 1986, 17 summers have produced a positive return. Will hard facts see the demise of this market myth? I doubt it.