The importance of comms between investment trust boards and shareholders

Investment trust boards have not always communicated as well as they should.

Investment trusts are run by a board of directors because they are publicly listed companies. The boards focus on general corporate governance such as investment strategy, policy and performance but usually outsource investment management and other functions to external service providers.

They can include an investment manager, broker or financial adviser, company secretary, administrator, auditor, accountants, lawyers, custodian, registrar, depositary, and bank for expenses and credit facilities. 

The Association of Investment Companies’ code of corporate governance, which sets out a framework of best practice for governance of investment companies, says proper oversight of relationships with external service providers by boards is a crucial aspect of achieving good corporate governance. 

“The board hires the fund manager, negotiates the terms of the appointment, reviews the terms periodically — most notably the fees — scrutinises the manager’s performance and, if necessary, fires and replaces the fund manager,” says Monica Tepes, non-executive director of the European Assets Trust and Golden Prospect Precious Metals investment fund.

“The relationship ideally is one of close business partners, however, the board should retain its independence, maintain the necessary objectivity and act at all times in the best interests of shareholders — even if those interests are detrimental to the fund manager.”

For this reason, investment trusts sometimes change their manager for reasons such as poor performance.

Recent manager changes include Social Housing Reit, which moved from Triple Point to Atrato Partners; and Artemis UK Future Leaders (formerly Invesco Perpetual UK Smaller Companies Investment trust), which moved from Invesco to Artemis. Both of these moves have resulted in lower fees being paid to the new managers. 

Annabel Brodie-Smith, director of communications at the AIC, says that many boards have also negotiated down fees or improved the fee structure while retaining their existing managers. 

Other key board duties include monitoring a trust’s discount or premium to net asset value and, if necessary, trying to reduce them, for example by buying back or issuing shares.

See this FT Adviser article, “How investment trust boards work”, for more on investment trust boards’ duties.

Communication with shareholders

An important board duty is “ensuring effective and timely shareholder communication,” according to the AIC corporate governance code. The AIC highlights good examples of this in its annual Shareholder Communication Awards. 

For example, this year the judges awarded Alliance Witan the “Best Report and Accounts – Generalist” because of its “thoughtful approach to reporting, clear communications and the visually engaging design. The report is easy to read and helps investors understand the company’s investment approach”.

Cordiant Digital Infrastructure, meanwhile, “impressed the judges with an in-depth report featuring investor insights, valuable portfolio information and strong financial key performance indicators”.

And judges applauded VinaCapital Vietnam Opportunity Fund’s winning factsheet “for the insightful market and stock commentary. The changing landscape in Vietnam was communicated with simplicity while providing a comprehensive and accessible view of the country’s potential”.

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However, some boards have been criticised for poor levels of disclosure. A recent example is Gore Street Energy Storage Fund’s (GSF) board, which had been challenged by activist investor RM Funds earlier this year over issues including not being able “to reconcile fees disclosed by the external investment manager (in their annual accounts) to the cost lines reported in the [trust’s] annual accounts”.

RM Funds requested a full fee reconciliation, and the trust’s board admitted at its September annual general meeting that the amount of some payments to investment manager Gore Street Capital were not disclosed. But it has since provided details of these for its 2023-24 and 2024-25 financial years. 

GSF’s board says that it “complies with all reporting obligations, which are audited by EY, the external independent auditor, and is confident that all disclosures were properly made, however, [the trust] will regularly update these going forward to ensure full transparency”.

RM Funds’ other concerns include “that the factsheets contain no operational key performance indicators” and “investors cannot make informed decisions without regular, transparent and decision-useful disclosure”. RM Funds also wants to see monthly reporting of figures including total revenue per asset per month, alongside operating costs, and dividend cover.

It says that if the trust does not deliver on these and a number of performance objectives, it may call a further extraordinary general meeting to hold the trust and its manager to account.

And there could be further pressure on GSF’s board as another activist investor, Saba, now has a shareholding in excess of 5 per cent of voting rights. 

Direct communication with shareholders is also important. Boards should “have a good understanding of the investment trust sector and its shareholder base, so that the communications focus on the areas that are of key interest to the investors, and provide information they find useful and in a clear format and language,” says Tepes.

“This is particularly important for alternative asset classes, where reporting is more complex. Having good lines of communication with institutional investors is also key. But I think that communication between boards and institutional shareholders could in some cases be better.

“When important changes are being proposed, it is imperative to consult with shareholders, especially the larger ones, ahead of the proposals being made public.”

Maven Renovar in the spotlight

As an example, Maven Renovar VCT’s board has been criticised for not speaking to many shareholders about a proposed change of investment policy to enable the venture capital trust to invest more widely in unquoted companies, as well as plans to change its investment manager from Amati Global Investors to another company.

“They claimed they spoke to shareholders but clearly it was not wide enough,” says Ben Yearsley, investment consultant at Fairview Investing and a shareholder in the VCT. “They just assumed shareholders would accept a new investment [policy that would enable the VCT to invest more widely in unquoted companies].”

However, at the VCT’s annual meeting in June, shareholders voted against the proposal to change the investment policy.

Yearsley says that if the board had consulted more widely, shareholders would have voted in favour of a change to the investment policy. He also says that they would have been more accepting of the change in investment manager earlier this year, which was done without being put to a shareholder vote, as this is not required for this type of change. 

Following shareholders’ rejection of the new investment policy, the VCT’s former manager Paul Jourdan at Amati thought he would have enough support to oust the directors and get himself and three other new directors elected to the board, but shareholders voted against this in August.

However, this “cost shareholders a lot of money” as the board had to call extra meetings and send out information to make their case, says Yearsley — something he argues would not have been necessary had there been better communication in the first place. Over the six months to July 31 2025, the VCT’s expenses included £397,000 for a general meeting requisitioned by former manager Jourdan and other shareholders, and £242,000 for the board’s strategic review of the investment policy and fund manager. 

But Fiona Wollocombe, chair of Maven Renovar, says that as “the VCT has a large and diverse shareholder base, it is unfortunately impossible to consult with all shareholders individually. However, [we] maintained an open dialogue with shareholders throughout the lengthy, comprehensive and detailed strategic review.

“Alongside the former investment manager, we consulted with shareholders, as well as independent financial advisers with clients invested in the VCT, who represented over 20 per cent of the shareholder base.

“With a predominantly retail shareholder base, consultation at scale — and via a process that represents value to shareholders — will always be a challenge. We went to great lengths to engage but will always seek to find new ways to consult in line with best practice.”

She adds that the board has recently discussed with the AIC its latest guidance on shareholder engagement and communication. One of the areas they “will be looking at is an opt-in policy on communications with shareholders, without which shareholders may be susceptible to missing out on important communications from the board or manager,” explains Wollocombe. 

Maven Renovar is not raising funds this year because of the difficulty in finding suitable investments on Aim, where it currently focuses. However, its board still hopes to change the investment strategy to enable a greater degree of investment in unquoted companies while continuing to invest in Aim and Aquis Stock Exchange-quoted companies. Yearsley says that they will need to make a more compelling case for why this should be done.

Wollocombe says that the board has “actively started” that process. “Since the requisitioned general meeting [to remove the board], we have already reached out and engaged with requisitioners and other shareholders who are in communication with the board. [We] will consult widely before any decision is made” on changing the investment strategy or making a tender offer.

Leonora Walters is a freelance journalist