... to all cases in which investment trusts are operated by officers of another, closely related institution, financial or otherwise.

In fact, it may be generalised to all similar revolving door situations: The problem is that the widows and orphans entrust their money to money managers (or industrial policy to industry insiders, or regulatory power to lobbyists) whose institutional loyalty (and institutional incentive structure) is to their fellow Villagers first, and the widows and orphans second.

Actually, the wind farm is probably a poor example, because 6 % real return on investment is not a bad gilt-edged return (and it is gilt-edged if you invest in a well-managed wind project in a country where the regulatory regime is reasonably stable).

A better example would be investment banks sponsoring investment trusts staffed with the banks' own officers, who then turn around and purchase the banks' own structured products. In that case, not only can the banks and fund managers over-price the products, they can also under-assess the risks. And for widows and orphans, undeclared risk is a bigger problem than low returns.

- Jake

Friends come and go. Enemies accumulate.