Special Report on Investment Trusts (4): A noble house returns to its roots in people's capitalism: Paul Durman looks at recent changes at Flemings, one of the oldest fund management houses, whose first trust was set up almost 120 years ago

FLEMINGS, one of the oldest management houses, epitomises the way in which the investment trust industry has come full circle.

The investment trusts which began to appear from the late 1860s were intended to offer private individuals access to the stock market, and to share in the benefits of British investment overseas. Having allowed their share registers to become dominated by institutional investors, trusts have again embraced private clients, wooing them in ever greater numbers with their savings schemes.

Lord Mark Fitzalan Howard, chairman of Fleming Investment Trust Management, says: 'Our aim is to return investment trusts to the people for whom they were originally designed, the private investor.'

Flemings is now pulling in pounds 2m a month through its savings plan, which Lord Mark says is 19 per cent of the industry total.

The whole business has been given a fillip by the introduction of savings plans, which offer the cheapest way of buying shares. The weight of money flowing into investment trust shares every month has also helped to reduce the discounts at which trust shares typically trade to their net asset values (NAV). This makes trusts less likely to attract a hostile takeover from a discontented institutional shareholder.

Flemings' introduction of its savings plan in 1984 followed an important restructuring of the group. The firm decided there was too much overlap between its 13 trusts. This led to the unitisation of three trusts which were standing at deep discounts to their NAV and the loss of pounds 127m of funds under management from a total of pounds 658m.

Flemings also rebranded its trusts by adding its name as a prefix to theirs. This recognised the advantage unit trusts had by being identified with a particular investment manager.

The group's first trust was set up in 1873. Robert Fleming became involved in investment management through his need to invest the profits from his business as a jute merchant. Although Flemings later moved into other areas, investment management remains by far the largest. Today it manages about pounds 28bn and employs more than 4,000 people world-wide.

About pounds 2.4bn of this is in investment trusts, which, until recently, made it the biggest manager in the industry. Henderson's acquisition of Touche Remnant means that it now just pips Flemings for the top spot.

The Fleming family still own about 40 per cent of the company. Robin Fleming, the current chairman of Robert Fleming Holdings, called all his relatives together last year to tell them more about what it is they own.

One of the reasons behind Flemings' eagerness to attract private clients is its recognition that many institutional investors are 'inappropriate' shareholders of trusts, their holdings often dating back to the time when they lacked expertise of a particular market.

Nevertheless, Flemings keeps in close touch with institutional holders of its trusts, one of the reasons the firm has not 'lost' a trust in recent years. Lord Mark says the other reason is good investment performance, its average trust having out-performed the industry average over the last 10 and 15 years.

Not all have done so well, and a five-year comparison is less flattering. Flemings' worst performing fund is European Fledgling, whose shares have lost more than two-fifths of their value since it was converted from an open- ended fund in 1990. David Paterson, investment director, says the trust has stuck to its brief of European smaller companies and believes it has performed reasonably well against that benchmark.

With private investors in mind, Flemings has turned annual meetings of its trusts' shareholders on their heads. There was a time when investment trusts measured the success of their AGMs by the lack of investors attending and by their brevity. Lord Mark says at least one meeting was completed in under a minute.

The company is now keen to encourage a good turnout of trust investors, to encourage better understanding of share ownership. Flemings' trusts regularly attract 100 shareholders, and it has had as many as 200.

Lord Mark adds: 'I can truthfully say that it was one of the happiest days of my life when we had to adjourn the Claverhouse AGM and have it next door (in the Institute of Chartered Accountants).' Individual investors are given the opportunity to ask the managers of their money what's going on. Lord Mark says: 'I've sweated quite a lot at some of these AGMs but that's how it should be.'

In another move aimed at delivering its product to the private investor, Flemings makes more effort servicing independent financial advisers. Flemings is one of the groups which enables advisers to take a commission from new clients making an investment.

The erosion of large discounts during the 1980s made it possible for Flemings and others to launch new trusts. The company brought in pounds 25m with its High Income trust in 1989, pounds 60m with its Emerging Markets trust in 1991 and, a year ago, pounds 92m with its split-capital Income and Capital trust. Opportunities for further launches are much reduced since last year's Budget eliminated an anomaly which allowed new investment trusts to take up to pounds 12,000, twice the annual limit, from personal equity plans. Lord Mark says new trusts will no longer be able to take pounds 150m or more and a number of recent trusts have had to be scaled down.

To increase the size of its existing trusts, Flemings is meeting some purchases through its savings scheme with newly issued shares. This is only possible where shares are trading at a premium to NAV, which restricts this to Claverhouse, Income & Capital and Emerging Markets.

The industry's longer term ambition must be to increase its share of the personal savings market. Deposits with the Halifax Building Society alone are more than twice the size of the total funds invested through investment trusts.

'If we talk grandly about getting pounds 2m a month, that's not even crawling,' says Lord Mark. He says investment trusts are ideal for the first time investor to gain exposure to the stock market. 'The more people who invest in the stock market, the greater will be their understanding of what capitalism is all about.'

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Life and Style
Arts and Entertainment
Rocky road: Dwayne Johnson and Carla Gugino play an estranged husband and wife in 'San Andreas'
filmReview: In the face of all-round devastation, even Dwayne 'The Rock' Johnson appears a little puny
Arts and Entertainment
Bright lights, big city: Melrose Avenue in Los Angeles by dusk
Harry Kane makes Paul Scholes' Premier League team of the season
footballPaul Scholes on the best players, managers and goals of the season - and the biggest disappointments
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Pricing Analyst

    £30 - 35k: Guru Careers: We are seeking a Pricing Analyst to join a leading e-...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K YR1: SThree: At SThree, we like to be dif...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is a mul...

    Guru Careers: C# Project Team Lead

    £55 - 65k (DOE): Guru Careers: A unique opportunity for a permanent C# Develop...

    Day In a Page

    Fifa corruption: The 161-page dossier that exposes the organisation's dark heart

    The 161-page dossier that exposes Fifa's dark heart

    How did a group of corrupt officials turn football’s governing body into what was, in essence, a criminal enterprise? Chris Green and David Connett reveal all
    Mediterranean migrant crisis: 'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves,' says Tripoli PM

    Exclusive interview with Tripoli PM Khalifa al-Ghweil

    'If Europe thinks bombing boats will stop smuggling, it will not. We will defend ourselves'
    Raymond Chandler's Los Angeles: How the author foretold the Californian water crisis

    Raymond Chandler's Los Angeles

    How the author foretold the Californian water crisis
    Chinese artist who posted funny image of President Xi Jinping facing five years in prison as authorities crackdown on dissent in the arts

    Art attack

    Chinese artist who posted funny image of President Xi Jinping facing five years in prison
    Marc Jacobs is putting Cher in the limelight as the face of his latest campaign

    Cher is the new face of Marc Jacobs

    Alexander Fury explains why designers are turning to august stars to front their lines
    Parents of six-year-old who beat leukaemia plan to climb Ben Nevis for cancer charity

    'I'm climbing Ben Nevis for my daughter'

    Karen Attwood's young daughter Yasmin beat cancer. Now her family is about to take on a new challenge - scaling Ben Nevis to help other children
    10 best wedding gift ideas

    It's that time of year again... 10 best wedding gift ideas

    Forget that fancy toaster, we've gone off-list to find memorable gifts that will last a lifetime
    Paul Scholes column: With the Premier League over for another year, here are my end of season awards

    Paul Scholes column

    With the Premier League over for another year, here are my end of season awards
    Heysel disaster 30th anniversary: Liverpool have seen too much tragedy to forget fateful day in Belgium

    Liverpool have seen too much tragedy to forget Heysel

    Thirty years ago, 39 fans waiting to watch a European Cup final died as a result of a fatal cocktail of circumstances. Ian Herbert looks at how a club dealt with this tragedy
    Amir Khan vs Chris Algieri: Khan’s audition for Floyd Mayweather may turn into a no-win situation, says Frank Warren

    Khan’s audition for Mayweather may turn into a no-win situation

    The Bolton fighter could be damned if he dazzles and damned if he doesn’t against Algieri, the man last seen being decked six times by Pacquiao, says Frank Warren
    Blundering Tony Blair quits as Middle East peace envoy – only Israel will miss him

    Blundering Blair quits as Middle East peace envoy – only Israel will miss him

    For Arabs – and for Britons who lost their loved ones in his shambolic war in Iraq – his appointment was an insult, says Robert Fisk
    Fifa corruption arrests: All hail the Feds for riding to football's rescue

    Fifa corruption arrests

    All hail the Feds for riding to football's rescue, says Ian Herbert
    Isis in Syria: The Kurdish enclave still resisting the tyranny of President Assad and militant fighters

    The Kurdish enclave still resisting the tyranny of Assad and Isis

    In Syrian Kurdish cantons along the Turkish border, the progressive aims of the 2011 uprising are being enacted despite the war. Patrick Cockburn returns to Amuda
    How I survived Cambodia's Killing Fields: Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape the US

    How I survived Cambodia's Killing Fields

    Acclaimed surgeon SreyRam Kuy celebrates her mother's determination to escape to the US
    Stephen Mangan interview: From posh buffoon to pregnant dad, the actor has quite a range

    How Stephen Mangan got his range

    Posh buffoon, hapless writer, pregnant dad - Mangan is certainly a versatile actor