A new investment trust that aims to raise £125 million by October through offering “better returns for people, better impact on society”, launched on Friday. The People’s Trust, will list on the London Stock Exchange on October 10 and the Social Stock Exchange on 17 October.
It will target a total return of 7 per cent per year over seven years, after costs (assuming CPI inflation averages 2 per cent).
In distinct opposition to many investment trusts available in the UK, The People’s Trust, founded in November last year by former Chair of the Investment Association, Daniel Godfrey, wants to challenge short-termism in investing and put a greater focus on sustainable wealth creation.
The trust strives to resist the endemic pressures within the financial world to deliver short-term returns at the cost of long-term potential and to fulfil the purpose of investment – sustainable wealth creation – while generating the best possible returns for its shareholders.
“The UK needs a radical transformation of capital markets if they are to fulfil their purpose of sustainable wealth creation.”
Sir Vince Cable
Why is it so different?
- Its primary objective is to deliver long-term total returns, measured over seven-year time horizons with no index benchmarks and its portfolio managers are retained on seven-year contracts to match this objective
- It is independent of any investment management firm: it crowdsourced its set-up costs
from more than 2,400 “founders” who wanted to have a fund created for the benefit of
investors, rather than to be a product created by a commercial enterprise.
- The trust has an independent board and its own chief executive, so as the fund grows, economies of
scale can help reduce investors’ costs. The board including the chief executive are investing more than £1.5m at launch.
- It won’t pay performance fees to portfolio managers or bonuses to executives. This removes the risk of focusing on short-term performance rather than long-term returns. In addition the non-executive directors will waive their fees in full and the CEO Daniel Godfrey will waive half his salary for two years or until the Company reaches net assets of £250m if earlier.
- Initially one per cent (to a five per cent maximum) will be allocated to a Social Impact Investment Fund managed by Big Issue Invest Fund Management, primarily investing in loans to social enterprises and charities tackling poverty and creating opportunity for people and communities across the UK.
Godfrey says: “We want to encourage investee companies to stand up to pressure from shorter-term investors and markets and to invest in their own long-term sustainable futures. We believe that this will
lead to better long-term returns for our shareholders.
“We believe that this should also lead to a better impact on society through greater investment in people, innovation and R&D; better supply chains and support for communities; more concrete steps by companies to ensure protection of the environment; a principled focus on pay inequality, diversity and fair tax policies; and greater integrity in lobbying activities.
“We also want to build financial inclusion and intend to develop an ISA savings platform in 2018 as a
very low-cost, shareholder service to provide simple and inexpensive access to anyone with a few pounds a week to save.”
Sir Vince Cable, MP, leader of the Liberal Democrats, said: “The UK needs a radical transformation of capital markets if they are to fulfil their purpose of sustainable wealth creation. 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 Peoples Trust will be a success.”
The full prospectus and information on how to apply for shares is available on The People’s Trust website.