Vote often, vote early

For intermediaries, this trend has the potential to create additional work. Many will have traditionally taken little interest in voting processes at investment trusts where they have placed clients’ money, often ignoring the more run-of-the-mill votes held each year at funds’ annual general meetings.

Now, however, they are being asked to get involved with votes that have potentially transformative implications for clients – some trusts are offering votes on wind-ups or totally new investment mandates, for example. Advisers may need time to think through the pros and cons of each set of proposals. They may also want to consult their clients.

In fact, research published last year by the AIC suggests a growing number of advisers recognise the importance of voting processes. The AIC found 56% of intermediaries who use investment trusts either vote shares on clients’ behalf or help them vote if they wish to. That figure was up from 49% in 2023, when the AIC last conducted similar research.

However, there’s clearly room for improvement. Not only are close to half of intermediaries not getting involved in voting, but some firms are much more active than others. The AIC found voting is far more common among wealth managers (74%) than financial advisers (32%).

Some intermediaries will complain that voting is too onerous. In the AIC’s research, the top reason for not voting given by intermediaries was that they did not have the time to do so. And to be fair, it’s not just a question of ticking a box – intermediaries will need to study the issues at each investment trust holding a vote, and to put the right processes in place for voting clients’ shares (or making it possible for clients to vote themselves).

Still, that effort is more than justified given what is often at stake. At Edinburgh Worldwide, for example, the activist investor Saba Capital is seeking to appoint new directors to the board of the fund; that’s widely seen as paving the way for the fund to appoint Saba Capital as its investment manager – and potentially to make seismic changes to its future investment portfolio and strategy.

Whatever advisers might think about the rights and wrongs of the Saba challenge, it could have a huge impact on their clients’ investments and ignoring the vote could therefore be a significant abrogation of duty.

More broadly, the voting processes held by investment trusts – both annually and at special general meetings – should be seen as a manifestation of one of the sector’s strengths. Corporate governance matters. It’s about the ability of the owners of a company, its shareholders, to hold the business and its directors to account.

In the collective fund world, this is an ability that only investment trust shareholders (and their representatives) enjoy. Other types of fund – which are really just fund management products – offer no such accountability.

Does this mean intermediaries should participate in every single vote at all investment trusts in which they have client monies invested? In practice, that’s probably unrealistic. However, when it comes to potentially transformative events such as the Edinburgh Worldwide vote, intermediaries should most definitely get involved. Those who choose not to exercise their shareholder power risk losing it altogether.