(Update) Former Investment Association chief Daniel Godfrey has been forced to cancel the launch of The People's Trust after failing to convince insitutional investors and wealth managers to back the multi-manager fund.
Although Godfrey says there was significant retail investor interest it was not sufficient to take the company past its minimum threshold of £50 million.
Launching the prospectus last month, Godfrey said he wanted to raise £125 million, an ambitious target given that new equity investment trust launches have struggled to raise half that amount this year.
The result is a devastating blow for Godfrey, who spent his early career marketing investment trusts before heading up the Association of Investment Companies for nine years and later taking the helm of the IA, the fund manager's trade body from which he was ousted two years ago after being perceived as too consumer friendly.
Investors who subscribed for the shares will get their money back in full, the company said.
In recent weeks it became clear that Winterflood, broker to the issue, was concentrating on the lower £50 million hurdle as professional investors proved resistant to Godfrey's arguments.
Although Godrey won support for his idea of giving external fund managers seven-year contracts to break out of the investment industry's chronic short-termism, his problem was that The People's Trust was not sufficiently unique. It faced two established rivals in Witan (WTAN) and Alliance Trust (ATST) which both used the multi-manager model of appointing external fund managrs for global stock market exposure.
To make matters worse, Alliance, which only adopted the approach in March, six months before People’s Trust launch, used the same investment adviser, Willis Towers Watson, although their external fund manager selections were completely different.
In a statement Godfrey said: 'It’s always hard to break the mould. While we have not succeeded on this occasion, the case we have made for a fundamental change in the investment chain has definitely left some cracks.’
He added: 'Our argument, for the investment chain to abandon its focus on short-term index-relative returns in favour of sustainable wealth creation and the stewardship to support it, has been widely accepted. One day it will happen - to the great benefit of investors, society and the economy.'
Godfrey took an innovative approach to the launch, raising £114,000 for its IPO (initial public offer) from a group of 'founders' who will lose an average of £45 each from the failure. In his statement Godfrey thanked his backers and expressed regret the scheme would not move forward.
He was also not afraid to get personally involved, responding to the comments of Investment Trust Insider readers, for example after he cited Jeremy Corbyn as an inspiration for the fund's name.