13th February 2026
You’ve probably all seen the analogy of a goalkeeper facing a penalty and active fund management. A goalkeeper feels pressure to dive one way or the other to look as though they are doing something, known as ‘action bias’, even when the evidence suggests they should stay still. A quick browse of the internet (old fashioned googling rather than asking an AI bot) found a Guardian article from 2023 that reported even though around 30% of penalties were shot down the middle, goalkeepers only stayed in the centre 6% of the time. Fund managers might feel the same compulsion to make changes to their portfolio and demonstrate their level of ‘activeness’ to justify their active fees, when doing nothing might be the best strategy. But the reason for using this analogy now is not actually in relation to active fund management, but the role of the Independent Boards of Directors of investment trusts.
Investment trust Boards play a vital role within the sector and their presence is a key differentiator when comparing trusts to open-ended funds. Knowing the Board’s primary role is to act in the best interests of shareholders rather than those of the incumbent investment manager is a huge source of comfort when it comes to making an investment. Of course there are examples where shareholders might feel that hasn’t been the case, but on the whole we think Boards do a pretty good job.
Among the numerous responsibilities, there is a requirement for the Board to conduct an annual review of performance of the investment manager and, just like a goalkeeper, there is bound to be pressure to ‘do something’ especially if a trust is experiencing a period of relatively poor performance. History is littered with examples of trusts changing managers and/or mandates at the worst possible time, but the one that sticks in the mind is Keystone Investment Trust switching from Invesco’s value style in January 2021 to Baillie Gifford’s long-term growth style and adopting the Positive Change strategy almost at peak growth and peak ESG. Subsequent performance was poor and the trust no longer exists. One example of a trust that switched managers but maintained the same style and strategy is Temple Bar when the Board moved the mandate from Investec to RWC (now called Redwheel) in 2020 but kept the value style. Subsequent performance has been excellent and justifies the Board’s decision.
While tempting after a prolonged period of poor performance, we would guard against kneejerk reactions to switch to a better performing strategy. A good reason for this is that investors need a choice of mandates across regions, themes and styles, so investors can decide whether to follow the herd or adopt a contrarian view. Shareholders own a particular trust for the specific exposure it provides so when there is a dramatic swich of mandate, that involves another investment decision for the shareholder to continue holding or sell and find an alternative. The level of discount or premium will also provide an indication of the popularity of a mandate and therefore a potential opportunity for the contrarian. Another reason for resisting kneejerk reactions is to avoid the perils of performance chasing. Often a certain style or specific manager will have done well because their investible universe has become more expensive. All things equal, higher valuations lead to lower future returns. Returning to the Keystone example, this was very much the case for growth orientated strategies in the run up to 2022.
One investment trust undergoing a prolonged period of poor performance is Finsbury Growth & Income (FGT), managed by Nick Train with his very distinct ‘quality growth’ style. Over the past 5 years (roughly the date Redwheel took over Temple Bar), FGT has underperformed the UK equity market by over 40%, while coincidentally Temple Bar has outperformed by over 40%. A relative chart is almost a mirror image. FGT’s portfolio contains some well-known brands and companies that are right in the firing line of changing consumer habits and the threat of AI disrupting business models. Our recent meeting with Nick Train confirmed that his conviction in the quality of those businesses remains high and that is reflected in the highly concentrated portfolio where the top 10 positions represent almost 90% of the assets. Whether that level of concentration is appropriate in a more uncertain world is debateable but at least it provides an option in the investment trust sector for investors to take that view.
In its most recent Report and Accounts, the Chair of FGT acknowledged the disappointing performance but supports Train’s belief in the quality of the underlying portfolio and that better times lie ahead for investors. Importantly, beyond those words, a continuation vote was offered so that shareholders could decide whether they wanted to carry on or not. As it transpired, 97% of those shareholders that voted were in favour of the trust continuing and therefore provided a clear vote of confidence for the mandate.
While there are plenty of trusts that have periodic continuation votes, perhaps more should introduce them as standard so shareholders make the ultimate decision on their chosen investment, during the good and bad times. A failure or a very close call will then prompt the Board to instigate a strategic review, which could involve a change of manager or strategy. In that scenario the Board would be taking action in response to shareholder feedback and not doing it unilaterally just because they feel an obligation to do something.
Daniel Lockyer – Senior Fund Manager
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For professional advisers only. This article is issued by Hawksmoor Fund Managers which is a trading name of Hawksmoor Investment Management (“Hawksmoor”). Hawksmoor is authorised and regulated by the Financial Conduct Authority. Hawksmoor’s registered office is 2nd Floor Stratus House, Emperor Way, Exeter Business Park, Exeter, Devon EX1 3QS. Company Number: 6307442. This document does not constitute an offer or invitation to any person, nor should its content be interpreted as investment or tax advice for which you should consult your financial adviser and/or accountant. The information and opinions it contains have been compiled or arrived at from sources believed to be reliable at the time and are given in good faith, but no representation is made as to their accuracy, completeness or correctness. Any opinion expressed in this document, whether in general or both on the performance of individual securities and in a wider economic context, represents the views of Hawksmoor at the time of preparation and may be subject to change. Past performance is not a guide to future performance. The value of an investment and any income from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you originally invested. FPC26642.
