While it is relatively easy to find out how much money a closed-ended manager has invested, since investment trusts are publicly listed, open-ended managers have no obligation to disclose their holdings.
Mark Dampier, head of research at Hargreaves Lansdown, says it is always positive to hear that a fund manager has a stake in their fund.
"It’s not a number-one priority, but it’s always good to know the manager has some meat in the game," he said.
"For one thing, it’s more tax efficient for the manager so it makes sense for them to invest, but it’s also encouraging to know the manager has something to lose as well."
"You tend to see the more experienced managers invest a big proportion of money in their own funds."
Charles Younes, an analyst on the FE Research team, agrees that it should be seen as a positive.
"It’s important to know that the manager's interests are in line with investors'," he said. "We don’t take it in to account when we calculate the FE Select 100, but we feel more comfortable when we know that the manager has a sizeable stake in their fund."
It is clearly an issue that matters to FE Trustnet readers as well. A poll last year indicated that 86 per cent of investors believe managers should be forced to disclose the amount of money they hold in their own funds.
Here are four high-profile managers who are heavily invested in their own portfolios and very open about their feelings on the subject.
Martin Gray
The lead manager of the CF Miton Special Situations Portfolio and Strategic Portfolio says it is hugely important for a manager to be invested in their own funds and he encourages others in his team to do the same.
"I’ve never allowed myself to invest in anything besides my own funds except for the odd savings plan in the past," said Gray (pictured). "I guess my largest holding is in Special Situations, which goes back a long time, but I have money in Strategic and the others as well."
"I think it’s hugely important and I make it quite clear to the other fund managers in the team and the other managers I work with that any investments they make should be in their own funds and not anywhere else, or at least within the range within the teams they’re running."
"I’m not happy about fund managers investing in any stocks that they won’t even consider to invest in in their funds. Why not invest in your own fund if you believe in what you’re doing? It’s been a long-term theme of mine."
Gray, who is an FE Alpha Manager, has run the £865m CF Miton Special Situations Portfolio since December 1997. According to FE Analytics, the fund is up 308.9 per cent over the period – by far the highest return in IMA Flexible Investment.
The average fund in the sector has returned 113.71 per cent over the 16-year time-frameand has also been significantly more volatile. The FTSE All Share, which has been even more volatile, has returned 128.48 per cent.
Performance of fund vs sector and index since launch
Source: FE Analytics
CF Miton Special Situations is a fund of funds that invests in a variety of asset classes, including equities, bonds and property.
Gray is currently extremely cautious, believing that the recent rally in equities is based on false pretences. This is reflected by his significant underweight position in equities, which make up just 30 per cent of the portfolio.
Such a stance has significantly hindered performance recently, sending the fund to the bottom quartile of its sector over one and three years. However, investors can be assured that Gray has as much to lose as they do in being so bold.
CF Miton Special Situations Portfolio requires a minimum investment of £1,000 and has an ongoing charges fee (OCF) of 1.73 per cent.
Alexander Darwall
Darwall (pictured), another FE Alpha Manager, says he is only interested in investing money in his European funds at Jupiter.
"Do I have an amount of money in my funds that matters to me? The answer is yes, enormously," he said. "I don’t own any other funds other than the ones I run. I don’t own any other investment instruments, except for some shares in Jupiter Asset Management."
The manager runs three portfolios at Jupiter – two open-ended and one closed-ended.
Darwall’s flagship Jupiter European fund is a top-decile performer in its IMA Europe ex UK sector over one, three, five and 10 years.
Performance of fund vs sector and benchmark over 10-yrs
| Name | 1yr (%) | 3yr (%) | 5yr (%) | 10yr (%) |
|---|---|---|---|---|
| Jupiter - European | 28.87 | 44.01 | 76.78 | 333.77 |
| FTSE Europe EX UK | 15.22 | 13.95 | 20.91 | 189.89 |
| IMA Europe Excluding UK |
19.54 | 19.01 | 25.36 | 176.2 |
Source: FE Analytics
Over the last decade, the fund has returned 333.7 per cent, compared with 176.2 per cent from the IMA Europe ex UK sector average, and 189.89 per cent from the FTSE World Europe ex UK index.
The £2.1bn fund requires a minimum investment of £500 and has an OCF of 1.79 per cent.
The Jupiter European Growth and Jupiter European Opportunities IT also consistently top their sector. Both are pan-European portfolios, meaning that they invest in continental Europe and the UK.
Hugh Young
A spokesperson for Aberdeen says the head of Asian equities invests his savings across his range of open- and closed-ended vehicles at the firm.
He is a director of four investment trusts, which makes it easy to see exactly how much of a vested interest he has across each portfolio.
Hugh Young’s investments
| Trust name | Money invested (£) |
|---|---|
| Aberdeen New Thai IT | 343,200 |
| Aberdeen Asian Smaller Companies IT | 156,240 |
| Aberdeen New Dawn IT | 140,022 |
| Aberdeen Asian Income IT | 29,150 |
Source: Aberdeen
Aberdeen confirmed that Young has the biggest stake in the Aberdeen New Thai IT, currently at £343,200.
This is followed by the Aberdeen Asian Smaller Companies IT, the Aberdeen New Dawn IT and Aberdeen Asian Income IT.
All four investment trusts are leading portfolios in their respective sectors, and have consistently outperformed their benchmark.
Aberdeen New Thai IT and Aberdeen Asian Smaller Companies IT are among the best-performing closed-ended trusts of the decade, with returns of 1,248.89 and 1,015.9 per cent, respectively.
Performance of trusts and indices over 10yrs
Source: FE Analytics
Their returns are equally impressive in the shorter-term; Aberdeen New Thai IT is up 279.15 per cent over five years, 226.68 per cent over three years, and more than 80 per cent over 12 months.
Aberdeen Asian Smaller Companies IT and Aberdeen Asian Income IT are both on premiums, but investors can still get access to Aberdeen New Dawn IT and Aberdeen New Thai IT on a discount.
Their OCFs range between 1.05 and 1.55 per cent, and none charge performance fees.
Stephen Thornber
The manager of Threadneedle Global Equity Income says he would always expect a manager to back his own skills.
"I have around 25 per cent of my and my wife’s personal net-worth invested in the Global Equity Income fund I manage for Threadneedle and I first invested in the fund the day it was launched in 2007," he said.
Data from FE Analytics shows that the fund leads the IMA Global Equity income sector over three years with returns of 42.34 per cent.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
The manager continued: "I’ve been a firm believer in investing in the funds I manage since starting out as a fund manager, this was instilled in me by my first ever boss who asked the simple question 'why should anyone invest money with you if you don’t do so yourself?'"
"This was brought home to me by the same boss who took part in a questionnaire of six leading fund managers, he was the only one of the six to have money in his own fund."
"I am committed to the fund and believe in the product and believe I should stand alongside my investors."
"Similarly, when analysing companies to invest in, one of the key things I examine is how much the managers of the business have invested in their own company, are their interests aligned with their shareholders', or are they taking their rewards in cash through their pay?"
"As an investor, I would certainly want to know why my fund manager wasn’t backing his own skills."
Threadneedle Global Equity Income has a minimum investment of £2,000 and an OCF of 1.73 per cent. It is currently yielding 4.2 per cent.