We believe every fund or investment trust should provide crystal clear information on how they look for investments, what they choose and how they manage their portfolio.

Sadly the quality of communication is variable across the industry. We will therefore use this article as a way of championing some of the asset management houses who excel at communication, in our view.

As a retail investor, choosing the funds or investment trust route means trusting someone else to make investment decisions. You are paying a fee to the asset manager, so they have a duty to tell you what they are doing.

At worst, some funds or investment trusts will only publish a brief document once every three months which contains their top 10 holdings and some performance data. We’d rather have insightful commentary once a month on their investment thinking and a complete breakdown of their portfolio.

We also believe asset managers could go a lot further in terms of providing information to investors. To give you some examples, let’s now look at five core areas which we believe elevate a fund or investment trust above the rest when it comes to communication.

1. Good at explaining their investment process

Wouldn’t it be nice if a fund or investment trust had a clearer strategy than only saying they look for growth stocks or ones that pay dividends? Fortunately there is a growing number of fund management companies which explicitly state what they desire when seeking investment opportunities.

Three great examples are Phoenix Asset Management, particularly for its work as manager of Aurora Investment Trust (ARR); Fundsmith for its two funds; and Liontrust for its multitude of products.

Phoenix has published ‘Primer’ documents that explain its culture and its investment approach; as well as describing what investors can expect from its fund and investment trust range.

Putting all this information, together with a performance history over each of the past 20 years, in a single document provides a powerful starting point for investors to then delve into its products.

As an aside, we note Phoenix’s website includes a list of its favourite investment books. It is always interesting to see what influences and stimulates the thought process of professional fund managers.

Demand more than a glossy brochure

Fundsmith publishes an ‘owners’ manual’ on its website, a somewhat different document than the typical glossy brochure you might receive from a fund manager.

‘Your understanding of what we are trying to achieve and
how we will approach it is a critical element in enabling us
to attain our goal,’ says Fundsmith, explaining why the manual is important.

This document details what Fundsmith likes, and doesn’t like, as well as talking about its investment process in simple-to-understand language.

Stock picking guide

Liontrust has a section on its website called ‘The power of process’ which provides a fascinating insight into how its fund managers pick stocks.

For example, it provides written information and a video talking about its ‘Cashflow Solution’ process and listing the four funds in its range which are managed under that process. Other processes include ‘Economic Advantage’ and ‘Structural Opportunities’.

‘At the heart of the Liontrust culture, which was launched in 1995, is the fact that our fund managers run funds and processes according to distinct investment processes which are documented and available on our website to retail investors,’ says chief marketing officer Simon Hildrey.

‘This means that investors in our funds know exactly how each team will manage their money and this helps them in blending our funds with others within their investment portfolio.’

Liontrust’s website was revamped in March this year with the objective of being accessible to all types of investors, regardless of their experience and knowledge of investment,’ adds Hildrey. ‘Around 95% of the content and information on our website is open to all investors, unlike many other fund management websites that ask visitors what type of investor they are.’

The asset manager also has a consumer panel of private investors who meet twice a year and provide regular feedback on Liontrust’s fund marketing and communication. Having the general public involved in the communication process should help to ensure Liontrust’s marketing is easy to understand and does not succumb to the jargon you often see in the finance industry, in our opinion.

2. Good at revealing what's in their portfolio

We believe that asset managers should tell investors exactly where they’ve invested their money, not simply the top 10 holdings in a fund.

Some managers include the full holdings in the annual report. We’d prefer to see a table that is updated monthly with the full holdings. Woodford Investment Management is one of the few fund houses to provide full disclosure. You can see the full holdings for its three funds which include CF Woodford Equity Income (GB00BLRZQ620) via its website.

‘We recognise that openness and transparency are key in building client understanding and we ensure that our clients get unprecedented levels of clear and relevant information about their investments, including unparalleled access to our investment team and transparency into our portfolio construction,’ says Woodford.

3. Good at revealing their latest thoughts on particular stocks

We believe it is vital to have regular insight into how a portfolio is performing and comment on the good and bad holdings.

A boring fact sheet will just contain data. A good fact sheet will include a summary of the previous month or quarter’s events, such as big news for particular holdings. A great fact sheet will reveal how the fund manager is embracing opportunities or dealing with challenges.

Annabel Brodie Smith, communications director at the AIC (which promotes the investment trust industry); gives four examples of fund managers who she believes provide ‘really interesting’ commentary.

She picks Sebastian Lyon at Personal Assets Trust (PNL), Nick Train at Finsbury Growth & Income (FGT), Ben Rogoff at Polar Capital Technology Trust (PCT) and Bruce Stout at Murray International Trust (MYI).

4. Good at commenting on their annual reports and accounts

Annual reports can provide a much greater insight into a fund or trust’s strategy than half year or full year results.

The 2016 annual report from real estate investment trust GCP Student Living (DIGS) is a great example of how you can obtain a considerable amount of information on a trust’s activity and its broader market.

The report includes historical information on earnings, valuations and dividends, as well as explaining its strategic objectives and lots of details on its property portfolio, among other items.

5. Good at keeping in touch with investors

Baillie Gifford says it is now reaching more investors as a result of increasing the range of communication activity.

Historically it has offered information via its website and produced a magazine twice a year called Trust. Now it also provides fund manager videos, runs regional events and writes more thought-provoking content.

‘We do much more in the way of events these days and our content has improved a lot,’ says James Budden, director of marketing and distribution at Baillie Gifford. ‘We are reaching more people.’

The asset manager has built a database of 65,000 interested investors and potential customers with whom it regularly interacts. It sends them content such as white papers and the aforementioned magazine which looks at investment thinking and trends. ‘They are viewpoints rather than saying “buy our investment trusts now”,’ comments Budden.

Each of Baillie Gifford’s trusts – which include Edinburgh Worldwide Investment Trust (EWI) and The Monks Investment Trust (MNKS) – has their own annual general meeting. The asset manager also runs two private investor forums a year, one in London and the other in Edinburgh, featuring four of its fund managers.

It has also started to run specific forums for its best-known trust, Scottish Mortgage (SMT), given it is now a member of the FTSE 100. An event has just been held in Birmingham for investors and there is one coming up in June in London.

Which funds and investment trust providers do you rate best for shareholder communication? Email us at yourviews@sharesmagazine.co.uk

DISCLOSURE: The author has a personal investment in Fundsmith Equity, Fundsmith Emerging Equities Trust and Scottish Mortgage referenced in this article.

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