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Every week, Kyle Caldwell and guests take a look at how the biggest stories and emerging trends could affect your investments, with practical tips and ideas to help you navigate your way through. Join the conversation, tell us what you want us to talk about or send us a question to OTM@ii.co.uk. Visit www.ii.co.uk for more investment insight and ideas.
Hello, and welcome to On the Money, a weekly look how to get the best out of your savings and investments. In this episode, we're gonna be focusing on skin in the game. Gonna be running through a recently published report from Investec that reveals the personal investments held by investment trust directors as well as some fund managers. We'll then turn our attention to whether fund managers should be required to reveal whether they personally invest in the funds or investment trust that they manage. Joining me to cover this topic is friend of the podcast, Sam Benstead, who as well as being an Interactive Investors Bond specialist alongside myself regularly covers funds, investment trusts, and ETFs, and interviews a lot of managers for our video series.
Kyle Caldwell:Sam, great to have you back on the podcast. I'll come to you in a moment. But, firstly, I'm gonna run through the main highlights from Investec's skin in the game report. Now for those that are not familiar with the report, it started back in 2010, and it details the amount directors have invested in the investment trusts that they oversee. It's published annually, and as it's been going now for fifteen years, there's lots of interesting data points that can be used to highlight trends.
Kyle Caldwell:Now where possible in the report, it highlights full managers and management teams in terms of what the skin in the game they have in the investment trust that they manage. However, there's no requirements for for managers managing investment trusts or indeed funds to disclose unless for an investment trust that they hold more than 3% of the shares. Now in total, this skin in the game report examined 249 investment trusts. I'm gonna start off with the negative numbers because, frankly, I do find it very disappointing when there are directors that haven't invested a single penny, particularly when they've been in the post for a couple of years or longer. So the report found that a total of 13.4% of directors had no personal investments in the investment trust they oversee, excluding those who've been appointed within the last year.
Kyle Caldwell:So they may not have had time yet to purchase. That figure fell to 8.2%. And for 27 investment trusts, the aggregate shareholding of the balls is worth less than the total fees received over six months. And 10 shares, which is 4% of those featured, so it is low. But 10 shares do not have any investments in their company.
Kyle Caldwell:I'm gonna read out the names just so you know who they are. So they're Orcs International Growth Fund, NuStar Investment Trust, Chelverton UK Dividend Trust, Baker Steel Resources Trust, Giga Counter, PRS REIT, Alternative Income REIT, Fair Oaks Income Fund, EcoFin US Renewables Infrastructure Trust, and Regional REIT. Now for the last two I've mentioned, the chairs were appointed last year and in 2025, whereas the others have been in the post for longer than that. So I'm gonna pass the button to you to cover the more positive aspects. So the report notes that having some skin in the game has become the accepted norm, and that is reflected by the increased amounts of skin in the game today compared to fifteen years ago when the report was first published.
Sam Benstead:Yes. That's right. So the industry has been moving in the right direction, although, as you pointed out, Kyle, there is still a lot of room for improvement. So the disclosed aggregate investment by boards and managers has increased from 687,000,000 in 2010 when the report was first published to 5,700,000,000.0 in May 2025. The report said, for those board members with no investment after an initial grace period, this stance does not sit easily with the degree of commitment now expected by most shareholders.
Sam Benstead:We have certainly come a long way since our first report when the views of many were summed up by one offshore director who berated us after publication saying, I'm on so many boards. I can't possibly have an investment in all of them. In total, 18 investment trusts have boards where all directors have shareholdings valued at more than one year's fee. So those trusts are Ashoka India Equity Investment Trust, ABI Global Trust, Bailey Gifford US Growth Trust, BlackRock Frontiers Investment Trust, Brunner Investment Trust, CC Japan Income and Growth Trust, Chenowari Toro Income Fund, Cordian Digital Infrastructure, CC Private Equity Trust, Ecofin Global Utilities and Infrastructure Trust, Penelity European Trust, India Capital Growth Trust, Invesco Global Equity Income Trust, Literacy Capital, Rockwood Strategic, Schroeder Asia Total Return, and Tetragon Financial Group, and finally, UIL Limited.
Kyle Caldwell:And as I touched on earlier, the numbers for full manager skin in the game, it's harder to quantify as there's no requirements for disclosure unless the full manager holds more than 3% of shares. However, where possible, the report does identify management and management teams that have large stakes in the investment trust that they manage. So a total of 44 managers or teams have more than 10,000,000 investors, while an additional 47 have between 1,000,000 and 10,000,000. Sam, could you run through the four managers that have the biggest stakes in the investment trust they manage? And could you also name some examples of fund managers that are overseeing investment trusts that are popular with Interactive Investor customers?
Sam Benstead:Absolutely. So as you mentioned earlier, Carl, there's no requirement for fund managers skin in the game disclosure unless they hold more than 3% of the shares. But there are some real notable examples to highlight here. So the largest investment by a manager is at Pershing Square Holdings, where the manager's shareholding is valued at £1,760,000,000. The name is not disclosed, but the fund manager at the helm of this US equities trust is Bill Ackman, who is a guest we've had on our video interview series a number of times.
Sam Benstead:And second and third are the management teams at Tetragon Financial Group and Apex Global Alpha, which have respective holdings of 338,000,000 and 206,000,000. Popular investment trust with II customers with significant skin in the game include Scottish Mortgage, Greencoat UK Wind, f and c, and City of London, with management stakes totaling 11,000,000, 6 point 5 million, 2 point 2 million, and 1,500,000.0.
Kyle Caldwell:Just before we move on discuss whether full managers should be more open with investors regarding whether or not they eat their own cooking, the report also sheds light on how boards have become much more diverse, shrugging off past criticism of being pale, male, and stale. So over four in 10 investment trust directorships are held by women compared to just 8% in 2010. Meanwhile, the number of all male boards has fallen from a 59 in 02/2010, which was almost two thirds of the original survey, to now just 12, which is in percent of the same as 5%. And in addition, 64% of investment trusts now have at least one individual from a minority ethnic background compared to 29% in May 2023. Sam, we've worked together for a number of years now, and we typically, each month, interview two full managers for our Vizio series, the insider interview, which you can find on our Interactive Investor YouTube channel, and we also publish it on the editorial pages of the Interactive Investor website, which is ii.co.uk.
Kyle Caldwell:In every video interview we do, we ask for managers whether or not they personally invest in the funds or investment trust that they oversee. So we wouldn't ask the question if we didn't think it was important for investors to know whether they have skin in the game. Sam, could you firstly give your view on the importance of skin in the game and whether you think full managers should be more open in communicating this with investors beyond people such as ourselves in in our positions with our jobs. We're able to ask this question, and other professions like fund analysts and other j m s or other publications, they can also ask the question. But if you're investors in the investment trust, that's really the only way that you can find that out unless it's in this report or they've it through a video interview, for example.
Sam Benstead:Yeah. I think it's an interesting conversation, and we, as journalists, have a responsibility to ask the hard questions that our customers and the end investors aren't able to ask, and skin in the game really is one of those in my view. Because as you say, there's no regulatory disclosure required of fund managers. It comes down to journalists to ask those difficult questions, and I think logically it makes sense that if a fund manager is personally invested in their fund, they should be managing the fund better. They should be more careful in what they buy and sell because they have a big stake in what the outcome is.
Sam Benstead:That said, while I think it's very important, I don't think it's everything, and there are plenty of good reasons that a fund manager may not want to invest in a fund or may or may not be able to invest in a fund. Just to list a couple of recent ones, had a fund manager in this year who was an American, and actually, he's not actually legally allowed to invest in the funds because they're they're UK open ended investment companies or or Oiks, so he was actually not able to invest in them. And there also might be other reasons. For example, if they're a young investor and they're running a quite defensive fund, it may not fit their risk appetite. So there are valid reasons.
Sam Benstead:We're gonna talk about more of those a little bit later, I think. But to summarize, it is important, but it's not everything.
Kyle Caldwell:Yeah. I totally agree, Sam. Context is, of course, very important. I mean, as you mentioned, the fund strategy or asset class may not be appropriate for the full manager's own investment goals or risk appetite. Use the example of a money market fund, Jeff.
Kyle Caldwell:That is a full manager who is, say, in their thirties or forties, then investing in a very low risk funds for the next twenty to thirty years may not, you know, fulfill their goals. You you know, they're probably gonna wanna take more risk than that. And, of course, at the other end of the risk spectrum, a full manager running a Latin American investment trust, for example, you wouldn't expect them to have a large proportion of their wealth in that investment trust due to it being a very high risk investment area. And in terms of skin in the game, I think percentage of overall wealth is the best measure of how much skin in the game is invested. And to be fair, when we do put the question to for managers, the vast majority do say that they do have some skin in the game, and some go a lot further than that.
Kyle Caldwell:They have a substantial amount invested in their own investment trust. One example that springs to mind is Peter Spiller, who's the long running manager of Capital Gearing Investment Trust, the wealth management vehicle. He told us that he has all of his personal wealth in Capital Gearing because he views that as the ultimate investment for him because it's got multi asset investments approach. My take is that skin in the game, it aligns an individual's interest with investors, and this arguably sends a powerful message to existing shareholders and to potential new ones. However, bear in mind, skin in the game, it's no panacea.
Kyle Caldwell:It doesn't guarantee success, but it does mean that a full manager shares both the good times and the bad times with investors. It could also potentially offer some reassurance that the full manager, you know, is confident in his or her own abilities and that they're optimistic about the future prospects for the investment trust that they manage. However, there's also a counterargument that it is a personal matter and that some foremanagers may not want to disclose. A final point for me is that there's also a risk of having too much skin in the game, which can lead to bad outcomes such as poor shareholder governance. Having too much skin in the game could also encourage excessive or too little risk taking.
Kyle Caldwell:Now we asked members of II community whether they would welcome greater levels of transparency from full managers in terms of skinning the game. Sam, could you run through the poll and the results?
Sam Benstead:Yeah. I think it might be helpful just to explain what II community is before we go into the poll results. So for those that aren't familiar, this is something we launched this year where II customers can actually have access to a social trading network where they can connect with other investors, talk about ideas, talk about pensions and ISOs, what they're investing in, what funds they like, what fees they're paying for different funds, and we now got over 20,000 members on that platform. And one of the really interesting things is that you can actually see other investors portfolios. You can't see how much they have invested, but you can see what they're invested in.
Sam Benstead:So in some ways, you can see the skin in the game of the II community members when they're talking about things that they are investing in or not investing in. It's free to join, and I really encourage everybody everybody to take part. There's also the occasional verified post for myself and Kyle where we share conversations like this or any interesting video interviews we've done. And one of those posts from Kyle was on skin in the game and how important it is to II community members. So the question was, would you welcome fund managers disclosing whether they invest in their fund or investment trust?
Sam Benstead:It was a popular poll with around 900 people responding, and the results were a resounding yes with 89% saying that they would like fund managers to disclose skin in the game. Just 1% said no, and 10 said they did not have a strong view.
Kyle Caldwell:And just to echo points that Sam May's IA community, it's great way to engage with like minded investors. It's also a great educational tool as well to learn from other investors. So I'm just gonna read out some of the comments that were made from this poll. So one of the members in the IR community says, I feel strongly that managers should disclose this to give investors greater confidence in them. Another member pointed out, in fairness, not all full managers have lots of immediate liquidity of an amount which demonstrates some level of commitments to invest in a fund they manage straight away.
Kyle Caldwell:It may take some time. Still, I vote yes. Another member commented that part of their compensation bonus could be a long term incentive through contribution directed to the funds locked away for three to five years. That was a great point. Not mentioned that so far in the podcast.
Kyle Caldwell:When we've asked the skin in the game question to for managers, some for managers respond by saying that part of their remuneration, which is their bonus, goes back into the investment trust that they manage. Another commented saying, full managers should be more transparent in this area, but can't ever see it being a requirement. Would be interesting for a full manager that runs several funds to disclose whether they invest in them all or otherwise. I think that's an interesting point because some full managers do run several funds. So I think it it would be interesting to know, do they invest in all of them, or is there one or two that they particularly favor?
Kyle Caldwell:And the last one I'm gonna read out said, I'd like to know how much of their wealth is held in their fund they manage. Anyone can hold a nominal amount of shares to tick a box. So that was just a flavor of some of the responses that we received on the skin in the game question. Do any of those stand out for you or any others have missed off some?
Sam Benstead:I think the comment on fund managers can just invest a very small amount and and tick a box, and, you know, we're not pushing them to say how much money they have invested. I don't think that would be appropriate, but but that person is is correct. If that became a requirement, then I could see every single fund manager investing something. And whether it's £1 or a million pounds, we wouldn't actually know. So in some ways, it wouldn't really really be a valuable data point.
Kyle Caldwell:Now while I do think it will never be a regulatory requirement for for managers to disclose skin in the game, in The US, Full Managers do disclose their skin in the game, and they do this by a band rather than a precise amount. So full managers are asked to tick one of the following bands whether they invest $1 to $10,000, over $10,000 to $50,000, over $50,000 to a hundred thousand dollars, over a hundred thousand dollars to $500,000, and over $500,000 to $1,000,000. Personally, I'd love to see that adopted in The UK, but, sadly, I don't think it will ever happen. But I think that would be great for those bans to be put on fact sheets, and then for managers would then have to tick which one based on the amount that they have investors. Or alternatively, the full manager could write a couple of sentences to explain whether or not they have skin in the game and give a flavor of how much of their wealth is invested in the investment trust.
Kyle Caldwell:So me and Sam, we've asked this question over a hundred times over the years. Sam, of the four managers you've interviewed, what responses have stood out for you of being a good answer to the skin in the game question?
Sam Benstead:So there there's a few really interesting ones. So Peter Spiller, the Capital Gearing Trust manager that you mentioned earlier, he actually told me how much money he's made from investing in his own funds, and he's been managing that fund for more than forty years. And he says he's made a 235 times return over that period, which is just extraordinary. Laurence Burns, the Scottish mortgage manager, told me that if you looked inside of LICA, you see just one holding, and that would be Scottish Mortgage Investment Trust, and he said he's never ever sold a share of Scottish Mortgage. Nick Train, the Finsbury Growth and Income Trust manager, has a lot of skin in the game, and when I interviewed him, it was during a difficult period for the investment trust, and he was saying that he was buying on the dip.
Sam Benstead:And then finally, one manager who I won't name actually told me he didn't have anything invested in the trust he was running, but he explained that he didn't want to be overly invested in his strategy because he already had lots of exposure to the trust performance, how the parent company was doing, and actually wanted to use his personal investments to diversify, which I think was a really interesting answer.
Kyle Caldwell:For me, two of my favorite answers to asking the game question. One is from Andrew Bell, who's the former chief executive officer of Whitten Investment Trust, which is now merged into Alliance Whitten. He says, you don't poison people if you eat the same food. And I thought that was a great analogy with cooking. You know, chefs eat their own food, so for managers, should eat their own cooking as well.
Kyle Caldwell:And it was quite a short response to the question, but I I think this gets across the importance of it. Kirsty Gibson, full manager of the Bailey Gifford US Growth Investment Trust. She said, yes, I do. And it is enough money that it matters to me. And for me, that sums it up really succinctly.
Kyle Caldwell:The if you're investing in your own fund or investment trust and it's a meaningful amount that matters for you, then I think that does align you very well with other investors. My thanks to Sam, and thank you for listening to this episode of On the Money. If you enjoyed it, please follow the show in your podcast app and do tell a friend about it. If you get a chance, leave us a review or a rating in your podcast app too. You can join the conversation, ask questions, and tell us what you like to talk about via email on 0cm@ii.co.uk.
Kyle Caldwell:And in the meantime, you can find more information and practical pointers on how to get the most out of your investments on the Interactive Investor website at ii.co.uk. And I'll see you next week.