Position Paper: Corporate Governance Practices in Externally Managed Trusts
Institutional investors recognise the value of strong governance structures in protecting their interests as providers of capital. In this context, governance structures that evidence alignment with the interests of unit-holders is a competitive advantage for issuers and managers of listed trusts.
Central to strong governance is the distinction between the interests of management and those of the owners of the capital provided. In the case of externally managed trusts, this requires particular attention to the mechanisms by which investors can be assured that their interests as unit-holders are prioritised ahead of the interests of the manager/responsible entity (RE).
We regard corporate governance principles (for instance those articulated within the ASX Corporate Governance Principles and Recommendations) as applicable to all listed Australian entities including externally managed trusts.
Our objective here is to offer guidance on how to address the specific corporate governance challenges faced by externally managed trusts. For the purposes of illustration, we include examples from the market of structures that apply (or approximate) the relevant principles within the externally managed trust structure.