The investment companies that make up such a large part of our FTSE 250 are in a mini-crisis. Many are sub-scale and depend on rather stale valuations of their assets. Investors have lost confidence in these valuations and are worried by the lack of new flows into these companies (investment trusts as they are usually known). There is a feeling that this is a forgotten corner of the market.

The problem is manifested in deep discounts from the stated valuations (NAVs) and the market capitalisation of the companies, feeding through to the traded share prices which are up to 30% lower than the prices the companies put on themselves.

This has meant that there have been no new listings, not much fund raising and  potential launches don’t happen.  The result is the “private fund”, where assets are held in the ownership of family offices and are inaccessible to pension funds and other investors.

There are clearly problems here and they matter, the investment companies invest in the kind of companies and infrastructure that has come to be known as “productive finance”, if this sector of the stock market continues to prove attractive to the pension funds, endowments and family offices that hold long-term assets, then there is a fault-line in the Chancellor’s plans (the Mansion House reforms).

We heard of wealth managers and institutional fund managers not being able to invest in these investment companies because of the perception given by discounts and because of  problems with regulatory disclosures

Some of these problems are of these companies’ own making but a good deal of their malaise stems from a bizarre anomaly in the way their charges are measured. It was to address this anomaly and put it right, that a group of enthusiasts for

The meeting acknowledged a  weakness in demand for investment trusts but described a barrier to purchasing as a  “big-own-goal from the regulator”.

The sponsors of the meeting , Baroness Bowles and Baroness Altmann explained that for many investors , investment companies are the best way to access private markets

These amazing “ready-made” portfolios of assets that you couldn’t get elsewhere. The Mansion House proposals and the Edinburgh reforms need them.

It was indeed good to see competitors working together in the interests of industry to get correct information to consumers so they can assess  the value they get get for the money they pay for shares in these companies.

The problem appears to be one of double counting – not of returns – but of charges

We’ve moved to a position where we tell investors about charges that they don’t pay and nobody else does this.

What’s gong to happen

The key to sorting out the problem appears to be EMT (the European Mifid template) which requires charges information to be displayed twice.  The display of the information is governed by Priips regulations and that too needs sorting

There is a consultation from parliament to look at the Statutory Instrument (SI) that governs disclosure but a further consultation from the FCA on a new – post Brexit – version of the collection template and the display, is due out early in the new year.

The meeting urged the FCA to get on with it and launch the consultation as early as possible.

A big question , raised by the trade associations present was that of “aggregation”, right now charges are aggregated and displayed as a single number, but this is leading to investors getting a number where the regulatory imperative is to be consistent with funds.

Again and again I heard those at the meeting saying that this was wrong, that investment companies are not the same as funds and that – as the costs are already in the discount to net asset value, they do not need to be displayed as if they had not already been accounted for. To use some of the huge amount of jargon being used – ICs aren’t AIFs and should have their own regulatory regime.

It was generally agreed that the interim solution- put in place by the Autumn Statement – that allowed “forbearance” for companies that wanted to disclose their way, wasn’t going to work. A number of companies said that neither their compliance officers or their investors were wanting them to jump the gun and disclose as they thought they should.

Indeed at one point the AIC seemed to be arguing that a compromise solution could be arrived at, where the FCA would keep investment companies “in the tent” and allow them to disclose in their own way.

This seemed to me to be a little too like a trade body getting above itself and I was glad that there were people in the room who challenged this position.

I am sure people say this of pension too (we all live in our own bubbles) but I did worry that apart from our hosts, there were no females present for the most part of the meeting.

I worried too that the meeting couldn’t work out whether it wanted to be under Chatham House or not. There is clearly a general feeling that investment companies should be transparent , but not much transparency about who said what!

If the Association of Investment Companies (AIC) want to address this, they should start by making Baroness Bowles and Altmann their spokespeople. They have never been shy of being on the record and the transparency of their statements is the public record that parliament keeps of what has been said – Hansard.

What was impressive – to me as an observer – was the high degree of consistency from each speaker which aligned with what the various members of the upper house and the Commons were saying.  It will need this consistency and solidity of purpose to change things.

The Government clearly gets the need for change, but can it act fast enough to avoid serious harm to consumer interests as the investment companies languish?

I suspect it will need the flamboyance and energy of Altmann and Bowles to make this happen.