Gravy train lives...by Mutual agreement
MUTUALS are meant to exist for the benefit of their members (customers). So, it’s a little surprising to see NFU Mutual chief executive Lindsay Sinclair enjoying a 16 per cent increase in his overall remuneration for the financial year 2015, according to accounts released on Friday.
Sinclair enjoyed a financial package worth £1,753,149, compared to £1,508,418 in 2014 with more than £1million being paid for meeting various short and long-term performance targets.
Indeed, more gravy is awaiting Sinclair’s plate this year and next. The accounts confirm that provided he keeps NFU Mutual – the countryside’s insurer – in good financial order, he will enjoy payments from the directors’ long-term performance incentive plan of £730,500 (2017) and £759,720 (2018).
Some NFU Mutual members will take the view that Sinclair is worth every dime. Fair game. But those who don’t can make their displeasure known by voting against the directors’ remuneration report ahead of the annual general meeting on June 23. Maybe, by holding it on the same day as the referendum vote on staying in (or getting out) of the European Union, NFU Mutual is hoping members’ attention will be elsewhere. I hope this is not the case. NO ONE should underestimate the value of fund management companies in our financial lives. They manage our pensions and invariably look after the money we pour into Isas. Yet fund management isn’t the finished article. Far from it.
Despite efforts by the regulator to ensure both greater clarity over the charges investment managers levy and more proof that companies are providing investors with value for money, the suspicion remains that we (investors) should be getting a better deal.
Although we profit from the investment expertise of some very talented fund managers and switched-on investment houses, we could – and should – be profiting more.
This point was drilled home to me last week when I had the pleasure to dine with the directors of Bankers Investment Trust following one of their regular board meetings in the City of London. This is a trust – one of only a select few – which really does put investors first. Among the directors present were chairman Richard Killingbeck (chief executive of private wealth manager WH Ireland); Matthew Thorne (former director of retirement home specialist McCarthy & Stone); and Susan Inglis (a director at investment house Cantor Fitzgerald Europe).
As independent directors of Bankers, their role is to hold manager Alex Crooke, who works for Henderson, to account on behalf of shareholders, ensuring he is investing the trust’s £720million of assets as effectively as possible.
So far, so good as far as Crooke is concerned. Over the past ten years, he has managed to get the trust to outperform its benchmark, the FTSE All-Share Index, by a country mile – a return of 108 per cent versus 59 per cent.
More impressively, he has continued the trust’s remarkable record for dividend growth. Fortynine years of consecutive increases in the annual dividend and despite the deteriorating dividend climate in the UK, the trust is very much on course to notch up the half century (it has enough cash stashed away in reserves to pay two years of dividends).
Yet it is the charges that Bankers levies which stand this trust apart from the (greedy) madding crowd. Its ongoing charge is a touch over 0.5 per cent – a third of the amount most rival investment funds (including those run by Henderson) impose on investors. In other words, it doesn’t suppress your gains with onerous charges.
Some other investment trusts pare ongoing charges to the bone. For example, Baillie Gifford’s Scottish Mortgage charges a tad under 0.48 per cent and has an even more impressive investment performance record than Bankers. But these are rare breeds.
If the likes of Bankers can deliver such super performance while not skimming off more than the top in fund charges, why can’t other investment fund managers?