Should fund managers reveal their ‘skin in the game’?

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This episode asks whether fund managers should divulge whether they invest in the fund or investment trust they oversee. To discuss the topic, Kyle is joined by interactive investor’s Sam Benstead. The duo cover a recently published report on investment trust ‘skin in the game’, give their views on whether fund managers should disclose their personal stake, and run through the results of a poll on the topic on ii Community.

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Kyle Caldwell, funds and investment education editor at interactive investor: Hello, and welcome to On the Money, a weekly look at how to get the best out of your savings and investments.

In this episode, we’re going to be focusing on ‘skin in the game’ and 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 investor’s bonds specialist also regularly covers funds, investment trusts, and exchange-traded funds (ETFs), and interviews managers for our video series.

Sam, it's great to have you back on the podcast. I'll come to you in a moment. But, first, I'm going to run through the main highlights from Investec's Skin in the Game report. Now for those who are not familiar with the report, it started 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 15 years, there's lots of interesting data points that can be used to highlight trends.

Now, where possible in the report, it highlights fund 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 managers managing investment trusts, or indeed funds, to disclose unless they hold more than 3% of the shares in an investment trust.

In total, this skin in the game report examined 249 investment trusts. I'm going to start with the negative numbers because, frankly, I do find it very disappointing when there are directors who 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, so they may not have had time yet to purchase, that figure fell to 8.2%.

For 27 investment trusts, the aggregate shareholding of the board is worth less than the total fees received over six months. And 10 chairs - which is 4% of those featured, so it is low - do not have any investment in their company.

I'm going to read out the names, so you know who they are. So they're Oryx International Growth Ord (LSE:OIG), New Star Investment Trust Ord (LSE:NSI), Chelverton UK Dividend Trust Ord (LSE:SDV), Baker Steel Resources Ord (LSE:BSRT), Geiger Counter Ord (LSE:GCL), PRS REIT Ord (LSE:PRSR), Alternative Income REIT Ord (LSE:AIRE), Fair Oaks Income 2021 Ord (LSE:FAIR), Ecofin US Renewables Infrastructure Ord (LSE:RNEW), and Regional REIT Ord (LSE:RGL).

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.

Sam, I'm going to pass the baton 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 15 years ago when the report was first published.

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Sam Benstead, fixed income lead, interactive investor: 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.

The disclosed aggregate investment by boards and managers has increased from £687 million in 2010 when the report was first published to £5.7 billion 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.

“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 Ord (LSE:AIE), AVI Global Trust Ord (LSE:AGT), Baillie Gifford US Growth Ord (LSE:USA), BlackRock Frontiers Ord (LSE:BRFI), Brunner Ord (LSE:BUT), CC Japan Income & Growth Ord (LSE:CCJI), Chenavari Toro Income Fund Ord (LSE:TORO), Cordiant Digital Infrastructure Ord (LSE:CORD), CT Private Equity Trust Ord (LSE:CTPE), Ecofin Global Utilities & Infra Ord (LSE:EGL), Fidelity European Trust Ord (LSE:FEV), India Capital Growth Ord (LSE:IGC), Invesco Global Equity Income Trust ord (LSE:IGET), Literacy Capital PLC (LSE:BOOK), Rockwood Strategic Ord (LSE:RKW), Schroder Asian Total Return Inv. Company (LSE:ATR), and Tetragon Financial Ord USD (LSE:TFG), and finally, UIL Ord (LSE:UTL).

Kyle Caldwell: As I touched on earlier, the numbers for fund manager skin in the game, it’s harder to quantify as there’s no requirements for disclosure unless the fund 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.

A total of 40 fund managers or teams have more than £10 million invested, while an additional 47 have between £1 million and £10 million. Sam, could you run through the fund managers that have the biggest stakes in the investment trusts 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, Kyle, there’s no requirement for fund manager 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 Ord (LSE:PSH), where the manager's shareholding is valued at £1.76 billion. 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.

And second and third place are the management teams at Tetragon Financial Group and Apex Global Alpha, which have respective holdings of £338 million and £206 million.

Popular investment trusts with ii customers with significant skin in the game include Scottish Mortgage Ord (LSE:SMT), Greencoat UK Wind (LSE:UKW), F&C Investment Trust Ord (LSE:FCIT), and City of London Ord (LSE:CTY), with management stakes totaling £11 million, £6.5 million, £2.2 million, and £1.5 million.

Kyle Caldwell: Just before we move on to discuss whether fund managers should be more open with investors regarding whether 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.

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 159 in 2010, which was almost two-thirds of the original survey, to now just 12, which is in percentage terms 5%.

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 fund managers for our video 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.

In every video interview we do, we ask fund managers whether they personally invest in the fund 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 first give your view on the importance of skin in the game, and whether you think fund managers should be more open in communicating this with investors beyond people such as ourselves, in our positions with our jobs.

We're able to ask this question, and other professions like fund analysts and other journalists or other publications, they can also ask the question. But if you're invested 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 answered it through a video interview, for example.

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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.

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 not be able to invest in a fund.

Just to list a couple of recent ones, I had a fund manager in this year who was an American, and he's not actually legally allowed to invest in the funds because they're UK open-ended investment companies or OEICS, 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.

We're going to talk about more of those a little bit later, I think. But to summarise, it is important, but it's not everything.

Kyle Caldwell: Yeah. I totally agree, Sam. Context is, of course, very important. As you mentioned, the fund strategy or asset class may not be appropriate for the fund manager's own investment goals or risk appetite.

For example, let's consider a money market fund manager. If the fund manager is, say, in their 30s or 40s, then investing in a very low-risk fund for the next 20 to 30 years may not fulfill their goals. They're probably going to want to take more risk than that.

And, of course, at the other end of the risk spectrum, a fund 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.

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 fund managers, the vast majority do say that they do have some skin in the game, and some go a lot further than that and have a substantial amount invested in their own investment trust.

One example that springs to mind is Peter Spiller, who's the long-time manager of Capital Gearing Ord (LSE:CGT) Investment Trust, the wealth management vehicle. He told us that he has all his personal wealth in Capital Gearing because he views that as the ultimate investment for him because it's got multi-asset investment 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, that skin in the game, it's no panacea. It doesn't guarantee success, but it does mean that a fund manager shares both the good times and the bad times with investors.

It could also potentially offer some reassurance that the fund manager is confident in his or her own abilities and that they're optimistic about the future prospects for the investment trust they manage. However, there's also a counterargument that it's a personal matter and that some fund managers 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.

Now, we asked members of ii Community whether they would welcome greater levels of transparency from fund managers in terms of skin in 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 who aren't familiar, this is something we launched this year where ii customers can access a social trading network where they can connect with other investors, talk about ideas, talk about pensions and ISAs, what they’re investing in, what funds they like, what fees they’re paying for different funds, and we’ve now got over 20,000 members on that platform.

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. 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 to take part. There’s also the occasional verified post by myself and Kyle, where we share conversations like this or any interesting video interviews we’ve done. 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?

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.

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Kyle Caldwell: Just to echo points that Sam made, ii 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. I’m just going to read out some of the comments that were made from this poll.

One of the members in the ii 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 fund managers have lots of immediate liquidity of an amount which demonstrates some level of commitment to invest in a fund they manage straight away. 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 fund, locked away for three to five years. That was a great point. We’ve not mentioned that so far in the podcast.

When we've asked the skin in the game, some fund 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, “Fund managers should be more transparent in this area, but can’t ever see it being a requirement. Would be interesting for a fund manager that runs several funds to disclose whether they invest in them all or otherwise.”

I think that's an interesting point because some fund managers do run several funds. So, I think it would be interesting to know, do they invest in all of them, or is there one or two that they particularly favor?

And the last one I'm going to read out said, “I’d like to know how much of their wealth is held in the 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 are there any others that I've missed off, Sam?

Sam Benstead: I think the comment that fund managers can just invest a very small amount and tick a box, and we're not pushing them to say how much money they have invested. I don't think that would be appropriate, but that person is correct. If that became a requirement, then I could see every single fund manager investing something, and whether it's £1 or £1 million, we wouldn't actually know. So, in some ways, it wouldn't really be a valuable data point.

Kyle Caldwell: Now, while I do think it will never be a regulatory requirement for managers to disclose skin in the game, in the US, fund managers do disclose their skin in the game, and they do this via a band rather than a precise amount.

So, fund 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 $100,000; over $100,000 to $500,000; and over $500,000 to $1 million.

Personally, I'd love to see that adopted in the UK, but, sadly, I don't think it will ever happen. But I do think that it would be great for those bands to be put on factsheets, and then managers would have to tick which one based on the amount that they have invested.

Or alternatively, the fund manager could write a couple of sentences to explain whether they have skin in the game and give a flavor of how much of their wealth is invested in the investment trust.

So, Sam and I, we’ve asked this question over 100 times over the years. Sam, of the fund managers you’ve interviewed, what responses have stood out for you as being good answers to the skin in the game question?

Sam Benstead: So, there’s a few really interesting ones. Peter Spiller, the Capital Gearing Trust manager that you mentioned earlier, he told me how much money he’s made from investing in his own funds, and he’s been managing that fund for more than 40 years. He says he’s made a 235 times return over that period, which is just extraordinary.

Lawrence Burns, the Scottish Mortgage manager, told me that if you looked inside his ISA, you’d 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 & Income Ord (LSE:FGT) 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.

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: I’ll share two of my favourite answers to our skin in the game question. One is from Andrew Bell, the former chief executive officer of Witan Investment Trust, which has now merged into Alliance Witan Ord (LSE:ALW). He said, “You don’t poison people if you eat the same food.”

I thought that was a great analogy with cooking. You know, chefs eat their own food, so fund managers should eat their own cooking as well.

The other was quite a short response to the question, but I think it gets across the importance of it. Kirsty Gibson, fund manager of the Baillie Gifford US Growth Investment Trust, said, “Yes, I do. And it is enough money that it matters to me.” And for me, that sums it up really succinctly. 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 OTM@ii.co.uk.

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. I'll see you next week.