Simon Edelsten quoted in Trustnet’s ‘The three differences between investment trusts and funds that you need to know’

Easier communication with shareholders was also identified as a crucial advantage of the trust structure…Trust investors are therefore usually better informed and more up to date than their counterparts holding the fund might be.

Shareholders can participate directly in trust management through annual general meetings (AGMs) and make their opinions more regularly known.

Simon Edelsten, manager of the Goshawk Global Fund and former manager of Artemis Global Select and Mid Wynd International Trust, agreed that this is an important benefit of trusts. “You know who your investors are, whereas in a fund it is difficult to know that and even more challenging to contact them,” he explained.

“The best approach to fund management is not just to perform. It is to justify your performance first and then perform off the back of it, and that is a lot easier in a trust.”

Sometimes, he explained, managers can be out of luck and it is difficult to tell when this might have occurred in a fund. In a trust, where managers know their shareholders and can explain the process, investors can ask if the strategy has contributed to the performance, making it easier to build a loyal base of investors.

“If you can get that communication right, I think trusts can definitely be easier to run”, he concluded.

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Another differentiating factor between funds and trusts for these managers is the existence of an independent boards.

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They add a layer of “governance and oversight” but because they are independent, they represent shareholder interests first and foremost. As a result, they serve as a way of “holding managers to account” and improve shareholder engagement.

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While managing trusts under board oversight could be challenging, Edelstein [sic] argued it was well worth it. He said: “If you have an investment trust with a very independent board that has good chemistry with the manager and the shareholders, it is tough to beat.”

For example, he explained that when managing Mid Wynd, he worked closely with the board and had a lot of trust from them. “Investors could see it, so we could trade at a premium. In trusts, you get to build this virtuous circle,” he added.

 

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