New trust plans to shake-up in­vest­ment short-ter­mism

The Peo­ple’s Trust pre­pares to join stock mar­ket with longer-term re­turns ap­proach

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Anew in­vest­ment trust hopes to lead the fight against in­vest­ment short-ter­mism, and at the same time fling open the doors to thou­sands of new in­vestors. The Peo­ple’s In­vest­ment Trust

is hop­ing to raise £125m and float on 17 Oc­to­ber. Re­tail in­vestors can take part in the IPO (ini­tial pub­lic of­fer­ing) of­fer via most good stock­bro­kers, if they so wish.

WHAT’S THE IN­VEST­MENT STRAT­EGY?

The Peo­ple’s Trust plans to in­vest across a range of funds with a par­tic­u­lar em­pha­sis on so­cial im­pact and re­new­able en­ergy as­sets.

An ini­tial 1% of the funds raised will be al­lo­cated to so­cial im­pact in­vest­ment, aimed at ad­dress­ing so­cial de­pri­va­tion in the UK and be­yond. This could in­crease to a max­i­mum 5% of trust funds in time.

Five highly-rated ex­ter­nal fund man­agers will build and run its in­vest­ment port­fo­lio. They include a clean en­ergy in­vest­ment strat­egy run by hedge fund Lans­downe Part­ners; and a UK smaller com­pany com­po­nent run by Artemis In­vest­ment Man­age­ment.

HOW MUCH MONEY COULD YOU MAKE?

The chief sell­ing point to new in­vestors, ac­cord­ing to the trust, is that its in­vest­ment re­turns per­for­mance will be mea­sured over a seven year time hori­zon, longer than the typ­i­cal three year cy­cle.

The Peo­ple’s Trust is aim­ing gen­er­ate to­tal re­turns of 7% per year over its seven year cy­cle af­ter costs. That tar­get as­sumes con­sumer price in­dex (CPI) in­fla­tion av­er­ag­ing 2% a year. The es­ti­mated on­go­ing cost ra­tio will be 1.07%.

It wants to en­cour­age the com­pa­nies in which it in­vests to ‘stand up to pres­sure from shorter-term in­vestors and mar­kets and to in­vest in their own long-term sus­tain­able fu­tures’. It be­lieves this will lead to bet­ter long-term re­turns for share­hold­ers.

‘The Peo­ple’s Trust has cre­ated our own in­vest­ment chain, so that we can fo­cus on long-term, sus­tain­able wealth cre­ation with­out the short­term pres­sure that plagues the in­vest­ment chain,’ says chief ex­ec­u­tive Daniel God­frey.

‘Short-ter­mism may be caused by profit risk and ca­reer risk, but it has done enor­mous dam­age to in­vestor re­turns and to the po­ten­tial that long-term in­vest­ment has to make the world a bet­ter place.’

Fund man­ager per­for­mance fees will also be linked to the trust’s seven year per­for­mance cy­cle, align­ing their aims with those of or­di­nary in­vestors.

‘The UK needs a rad­i­cal trans­for­ma­tion of cap­i­tal mar­kets if they are to ful­fil their pur­pose of sus­tain­able wealth cre­ation,’ says Vince Ca­ble, MP and leader of the Lib­eral Democrats.

‘The cur­rent sys­tem awards prizes for short-term, rel­a­tive re­turns and this comes at a high op­por­tu­nity cost to long-term pro­duc­tiv­ity and GDP growth as well as poorer re­turns for mil­lions of pen­sion savers.

‘The Peo­ple’s Trust has cre­ated a struc­ture and pur­pose which is able to chal­lenge the present model. Writ­ing as an in­di­vid­ual who sought in gov­ern­ment to pro­mote “long-ter­mism” in fi­nan­cial mar­kets, I hope that the Peo­ple’s Trust will be a suc­cess,’ he adds. (SF)

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