ALLIANCE Trust chairman Lord Smith of Kelvin is one of the highest-paid chairmen in the UK investment trust sector although he has ploughed almost the full sum back into the vehicle as a personal investment.

Research from financial services firm Canaccord Genuity has revealed that Lord Smith, who took over the chairmanship of Alliance Trust last year, gets paid an annual fee for his services of £120,000 while his investment in the trust stands at £119,520.

This will come as some comfort to the trust’s other shareholders, who next week will vote on whether to back plans put forward by Lord Smith to radically overhaul the way the portfolio is managed.

The plans involve moving the trust to a multi-manager approach overseen by investment firm Willis Towers Watson in addition to buying back the entire shareholding of activist investor Elliott Advisors.

While both actions will result in remaining shareholders paying higher fees, Lord Smith assured those attending a recent shareholder meeting to discuss the changes that he is so convinced they will bring about better returns that he has invested his own cash in the trust.

Canaccord Genuity director Alan Brierley said that while not all investment trust managers or directors invest in their own products, those that do “send a strong message out that they are aligning their interests with those of their investors”.

“They are eating what they are cooking,” he added. “We spend our lives trying to get investors to put money into vehicles and I’ve never met a client who disagrees [that board directors should also invest]. To get that 100 per cent support shows it is very important.”

Lord Smith was the only chairman of a Scottish trust to make it onto Canacccord Genuity’s highest-paid list, which was topped by RIT Capital chairman Lord Rothschild. He earns an annual fee of just over £2 million while his investment in the trust, which was set up in the 1960s to manage his family’s wealth, is just over £331m.

Of the Scottish trusts, the chairman of Independent Investment Trust, Douglas McDougall, has pumped by far the largest sum into his own portfolio at £35.3m. This is 641 times greater than his annual fee of £55,000 and equates to around £2m for each of the 17 years he has been on the trust’s board.

At the opposite end of the spectrum, the chairmen of some trusts run by Aberdeen Asset Management are the least supportive of their own products.

Howard Myles of Aberdeen Private Equity, who has been on the board for eight years and gets an annual fee of £40,000, invests nothing in the trust.

Similarly, Nigel Cayzer of Aberdeen Asian Smaller Companies, who has been on the board for 22 years and receives a fee of £30,000 a year, does not invest in the trust.

“Some boards and managers have significant investments and others leave room for improvement,” Mr Brierley said. “Some are looking a little bit anaemic.

“If you’ve been on a board for several years and you don’t have an investment then it raises questions.”