Quilter Cheviot calls for overhaul of investment trust sector governance
Only three out of the 41 investment trusts qualified for a green rating in each of the categories, while two received a red rating across the board.
During the first phase of its long-term engagement, Quilter Cheviot met with the chairs and other non-executive directors (NEDs) of 41 equity investment trusts. It found most, but not all, boards were open to constructive challenge and discussion.
One chair described engagement as «fatuous» when asked about providing more disclosure regarding the manager's approach to engagement.
Quilter Cheviot provided each investment trust with a red, amber or green rating on three criteria; board composition, board effectiveness, and disclosures for environmental, social and governance factors.
Losing trust: The ebb and flow of investment trust sentiment
Only three out of the 41 investment trusts qualified for a green rating in each of the categories, while two received a red rating across the board.
The category with the highest percentage of green rating was board effectiveness, at 70%, while nearly two-thirds (63%) of the boards achieved a green rating for composition and effectiveness.
Board composition was the category that had the greatest number of red ratings, with seven trusts representing 17% of the trusts within this universe.
The most common reason for the red rating for board composition was failure to meet the UK diversity targets, the presence of non-independent directors, or one or more directors serving over the recommended tenure of nine years with no plans to resolve this, indicating a lack of succession planning.
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