PA ANALYSIS: Make-or-break time for The People’s Trust

Added 4th August 2017

Daniel Godfrey is on a charm offensive. With the initial public offering (IPO) of The People's Trust pencilled in for 7 September, he is busy preparing to float the trust on two stock exchanges.

PA ANALYSIS: Make-or-break time for The People’s Trust

But while most firms would have a team of in-house experts liaising with the numerous parties involved in such an undertaking, Godfrey is flying solo, and burning the midnight oil, at what is a make-or-break time for the business.

The crowdfunding process to launch the trust closed on 31 July having raised more than £114,000 from 2,500 backers. This is no mean feat considering this has largely been on the back of PR and word of mouth.

It is this interest and financial backing that has given Godfrey, former chief executive of the Investment Association, the incentive to progress, but the next phase, achieving the “critical mass” of £125m for the IPO, is crucial to the trust’s future.

The trust’s investment approach is, in its own words, about delivering “better returns for investors and a better impact on society”.

The problem with the world, as Godfrey sees it, is that the current capitalism model is broken. This is something he says he learned during his three-year stint at the IA which ended somewhat acrimoniously.

"The next phase, achieving the “critical mass” of £125m for the IPO, is crucial to The People's Trust’s future."

Describing modern day capitalism, he says: “The impact of the sausage machine [of capitalism] is to incentivise companies to chop down trees in an orchard because the wood is worth more than the harvest.”

Godfrey therefore wants the trust to deliver long-term, cumulative total returns (5% plus RPI) measured over rolling seven-year periods. He aims to do this through long-term, high conviction investments that deliver sustainable wealth creation.

This will be achieved through a multi-manager approach, using five global equity managers, announced in May, managing bespoke, equally-weighted portfolios.

The trust will also be investing in a portfolio of social impact investments managed by Big Issue Invest, the social investment arm of The Big Issue Group. This will initially be 1% and potentially increase to up to 5% of the assets.

Godfrey says the idea is to foster a culture among shareholders of holding investments for the long term, hence the seven-year return target.

“If you dial up the time horizon, you improve the risk/return ratio,” he says. “That means better returns with less risk over time.”

He adds: “People can sell shares, but if they do in, say, four or five years if dissatisfied, don’t come to us for sympathy.”

But are fund selectors buying the story?

AJ Bell’s head of fund selection Ryan Hughes says Godfrey’s philosophy resonates with his firm’s ethos of wanting long-term investment strategies from managers that are genuinely prepared to be different from the benchmark – and don’t charge too much for the strategy.

“I would be fairly confident that clients on our platform would be interested in that type of strategy,” he adds.

But while in agreement with the approach, Hughes cautions that some investors might find the trust’s time horizon too long, particularly in the current world where everyone is fixated on short-term gain.

“One of the challenges to the approach that Daniel is taking, albeit one I totally agree with is, is the long-term nature,” says Hughes. “There is a definite mismatch between those that believe investors should take a long-term view and the behaviour we see from clients today, which feels ever more short-termist.”

Hughes believes there is a big education piece needed within the whole industry to help engrain that long-term patient approach to investing in people's thinking, but he has faith in Godfrey being the catalyst for that.

 

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About Author

Sebastian joined Last Word Media in 2017 as editor of Portfolio Adviser. He previously spent 10 years as a journalist and editor in the UK institutional investment sector, most recently as editor of Portfolio Institutional. Prior to that, he held several roles at Professional Pensions which is part of Incisive Media.

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