Trust managers receive £55mn free shares despite underperformance

The latest accounts of the £4.1bn RIT investment trust reveal the managers received £55mn of free shares over the past three years, a time period when the return achieved was just 5 per cent - considerably below the return of its benchmark. 

RIT is managed by J Rothschild Capital Management, and the accounts for the trust, covering the period of the 2022 calendar year, showed a payment in shares to the management company of £20.3mn for that year, and £55mn over three years. 

The £55mn of free shares goes to the staff and directors of J Rothschild Capital Management. The only business activity of J Rothschild Capital Management is the running of the RIT trust. 

Ron Tarbouche, who runs RIT on a day-to-day basis, is chief investment officer of J Rothschild Capital Management. 

Tarbouche and the company’s chief executive Francesco Goedhuis put their names to the fund manager’s statement in the most recent RIT accounts. 

The four directors of J Rothschild Capital Management were paid a combined £14mn in cash in 2021, and had an additional “deffered compensation” - which is likely to include the free shares - of £11.1mn.

This 5 per cent return was for the three years to the end of 2022. Since the start of 2023 the trust has lost a further 11 per cent, according to data from FE Analytics.

In a note to clients seen by FTAdviser, Alan Brierley, director of investment trust research at Investec, said he has long been a fan of the trust due to its defensive characteristics, but recent performance and the information about the share payments means he has now advised clients to sell their investment in the trust.

In RIT's annual report, the company said the £20.3mn payment for 2022 was part of a multi-year remuneration plan, rather than just reflective of the performance of 2022.

The net asset value of the trust declined by over 13 per cent in 2022 alone. 

The board of the trust also said the share payments are due to the managers hitting two of their key performance indicators, related to “business principles” and “culture”, although they did not hit their key performance indicators related to investment performance.

In 2022, the trust’s net asset value total return was a loss of 13.3 per cent, while the key performance indicator was to beat the return of a benchmark which lost 12.9 per cent.

RIT’s annual management charge is 1.59 per cent, this compares to the average fee for trusts in its sector of 1.18 per cent. 

According to the trust’s factsheet at the end of January, 39 per cent of the capital is invested in unquoted companies.