James Carthew in The Investment Trusts Handbook 2025:
JAMES CARTHEW looks at the increasingly high-profile role that boards of investment trusts have had to play as the sector has de-rated and shrunk over the last three years.
In my view, the role of the board is vital to the success or failure of investment companies. I spent the middle part of my career, when I was managing Advance UK Trust, encouraging and cajoling boards into taking action to discounts, address underperformance and otherwise improve things for shareholders. In 2001, when I started that job, it often felt like pushing water uphill. Over time the process became easier, and now I would go as far as to say that the vast majority of boards are doing a good job. However, there are always exceptions, and those are the ones that grab the headlines.
Shareholder power
The directors’ main job is to represent shareholders’ best interests. If shareholders feel that directors are not doing their job properly, they can vote to oust them. In extreme cases, as with the debacle of Home REIT, which truly is one of the worst examples of corporate governance failings in this sector, shareholders can band together to sue the company and its directors.
Boards hire and fire all of the service providers to the company, including the investment managers. Part of the battle 20 years ago was to ensure that directors were truly independent of the manager. Now this is less of an issue, but, as the recent row at PRS REIT has demonstrated, any suspicion that this is not the case tends to be dealt with severely.
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