A group of leading fund managers and financiers have come together to launch a fee-free investment trust, which will support cancer charities.
At a time when pension and fund charges are under attack by Labour party leader Ed Miliband, the Battle Against Cancer Investment Trust (BACIT) will waive all management fees and has convinced the funds in which it will invest to drop their fees as well.
Founder Tom Henderson hopes the investment trust will raise £250 million from investors when it launches on the London Stock Exchange later this month.
It will donate 1% of its assets to charity every year, with half going to the Institute of Cancer Research (ICR) and the other half to the BACIT Foundation, which supports charities such as Alzheimer's Research UK and Marie Curie Cancer Care.
BACIT will also invest up to 1% of its assets every year to back ICR research projects that have commercial potential.
Henderson is a former fund manager with Cavenove and hedge fund manager Moore Capital whose father was the former chairman of the ICR and the Royal Marsden Hospital in London.
He said: 'For many years I have wanted to find a way to combine my background in fund management with supporting the incredible work of the ICR. I believe this investment company will deliver superior investment returns and, I hope, also take a small step towards the ICR's vision of defeating cancer.'
Jeremy Tigue, manager of the Foreign & Colonial investment trust, will chair BACIT's board. One of its non-executive directors will be Jon Moulton, founder of Better Capital and a well-known figure in private equity circles. John Chatfeild-Roberts, chief investment officer at Jupiter Asset Management and head of its popular Merlin funds range, is expected to sit on its strategic advisory committe.
The trust will invest shareholders' money in up to 15 investment funds investing in shares (although not those in tobacco companies), property and commodities. Over a third of the money will be invested in conventional 'long-only' funds aiming to invest in areas that will rise in value. However, nearly 40% will go into hedge funds, which use a range of strategies, including 'shorting' stocks and shares expected to fall in value. It will also invest in private equity funds that supply capital to companies not listed on the stock exchange.
It will target an annual return of 10-15%, which may seem ambitious given the poor recent performance of property, hedge fund and many private equity funds
Mick Gilligan, head of research at stockbrokers Killik & Co, said: ‘I wouldn’t pay too much attention to a target return on any fund because it just depends on so many factors that are out of everyone’s control but otherwise I very much like the look of it.
‘Effectively you’re paying a 1% fee to a charity but the fact that there’s no underlying performance fees in these funds should make a meaningful difference over time. There are good names there and the management team behind it are putting in a significant amount of their own money, so it ticks a lot of boxes for us.’
A previous attempt at a charity fund launch failed a few years ago. Former Henderson fund manager and chief executive of North Investment Partners, John Husselbee, launched the Invest & Give trust to support Prince's Trust charities in 2009 but was forced to wind up the trust a year later after failing to attract enough money from investors.
The trust will float on the London Stock Exchange on 22 October. If it succeeds in raising £250 million it will be one of the lowest charging investment trusts, with a total expenses ratio (or costs as a proportion of assets) of just 0.2%-0.3%. However, the ratio will rise if the fund launches with less money.
Learn more about investment trusts
Investment trusts are one of the three main kinds of investment funds open to private investors. They are companies which invest in the stocks and shares of other companies. To learn more about their pros and cons watch this video from our Lolly Investor Programme series for beginners.