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The Financial Times Guide to
Investment Trusts
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The Financial
Times
Guide to
Investment
Trusts

Unlocking the City’s best kept secret

Second edition

John Baron
PEARSON EDUCATION LIMITED
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First published 2013 (print and electronic)

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To Thalia, Poppy and Leone,
with my love

And to those who have helped me,

with my thanks
 Contents
About the author
Author’s acknowledgements
Publisher’s acknowledgements
Foreword
Introduction: The evolving landscape of investment (trusts)

1 What are investment trusts?

Structure and gearing
Value and calculations
Discounts and premiums
Price and size
Range and reach
Governance and cost
Pros and cons

2 Better performance
The evidence
Undertaking research
Performance nuances
Maintaining perspective
Beware unit trust tables . . .
. . . and ‘sister’ funds

3 Competitive fees
Time and numbers
International comparisons
Other factors encouraging competition
Ongoing Charges calculation
 Lower investment trust costs
Performance fees

4 Structural advantages
Merits of a closed-ended structure
Poor selling decisions
Yield and diversification
Liquidity and volatility
Less mainstream assets

5 Geared tailwinds
Mathematical logic
The logic in practice
The issue of sentiment
Understanding ‘splits’

6 Discount opportunities
Factors influencing discount levels
Profiting from discount movements
Discount control measures
Z-statistics

7 Dividend heroes
The mechanics
Revenue reserve
Dividend heroes
Capital changes
Dividend terminology
Dividend metrics
Tighter discounts
8 Independent board
An evolving role
The AIC Code
Greater professionalism
Common interests
Monitoring holdings
Social accountability

9 Good communication
Report and accounts
Regular communications
Marketing and distribution
Investment roadshows and seminars
The AIC

10 Comparing investment trusts

The various factors
Outlook and balance
Manager and team
Long-serving managers
Valuations
Debt matters
Fee comparisons
Income considerations
Structure and discount control mechanisms
Financial Express and Morningstar
The golden rule

11 Perspectives – three fund managers

Nick Train
Neil Hermon
 Charles Jillings

12 Perspectives – the AIC and a board director

Annabel Brodie-Smith
Jonathan Davis

13 Perspectives – an analyst, a shareholder and

an editor
Alan Brierley
Lord John Lee of Trafford DL FCA
John Hughman

14 Deciding investment objectives

Saving and investing
Know thyself – risk tolerances
Income requirements
Currency considerations
Choosing a benchmark

15 Accessing markets
Retail Distribution Review (RDR)
Platform providers
Robo-advisers and exchange-traded funds
Wealth managers
Do-it-yourself

16 First principles
First steps
Time in the market
Reinvest the dividends
 Diversify to reduce portfolio risk
Rebalancing
Reaching investment goals

17 More considerations
Be prepared to be a contrarian
Keep it simple (and cheap)
Be sceptical of ‘expert’ forecasts
Embrace Einstein’s eighth wonder

18 Further considerations
Active versus passive
Portfolio turnover and conviction
Different investment styles
Marketability
An inconvenient truth

19 The Summer portfolio

Context
Breakdown
Equities
Thematic investments
Other asset classes
A holistic approach
A golden rule

20 Recent commentaries
Where are our pioneering giants?
Do not sell in May
Retaining faith in technology
Patience is usually a virtue
Keep calm and carry on

Index
 About the author
John Baron is best known to readers of the FT’s Investors Chronicle
magazine for having successfully managed and reported on two real
investment trust portfolios since 2009 – as measured by their appropriate
MSCI PIMFA Growth and Income benchmarks. His popular monthly column
is closely followed and helps investors – private and professional – with
their investments.
John has used investment trusts in both a private and professional capacity
for over 35 years. After university and the Army, in a career spanning 14
years, he ran a broad range of charity and private client portfolios as a
director of both Henderson Private Clients and then Rothschild Asset
Management (RAM). Whilst at RAM, he was also responsible for the core
UK equity portfolio.
Since leaving the City, John has helped charities monitor their fund managers,
contributes to other publications including The Investment Trusts Handbook
2020, and regularly speaks at investment seminars. He remains a member of
the Chartered Institute for Securities & Investment.
He has also founded Equi Ltd which manages the website
www.johnbaronportfolios.co.uk. The website reports in real time to
members on the progress of nine real investment trust portfolios as they
achieve a range of risk-adjusted strategies and income levels. The website’s
Performance page testifies to their success relative to benchmarks.
His central message is that investment trusts are the best form of funds for
most long-term investors if properly harnessed, and that investment is best
kept simple to succeed – complexity adds cost, risks confusion and usually
hinders performance. This philosophy runs through this revealing book about
the City’s best-kept secret.
 Author’s acknowledgements
The writing of any book is a real team effort. This book draws on the
expertise and talents of many people. My thanks go to all who have made
valuable suggestions, contributed to its compilation and helped with its
production.
In no particular order, I would particularly like to thank:
The team at the Association of Investment Companies (AIC): David Michael
(my first point of contact) and Sophie Driscoll for their expertise and
guidance, Annabel Brodie-Smith for her valued input, and Ian Sayers for his
contribution and wise oversight of such a great team;
The book’s contributors in Chapters 11, 12 and 13 for their perspective and
sage advice: Nick Train, Neil Hermon, Charles Jillings, Annabel Brodie-
Smith, Jonathan Davis, Alan Brierley, Lord John Lee of Trafford DL FCA
and John Hughman;
The editorial team at Pearson Education for their patience and
professionalism: Dr. Priyadharshini Dhanagopal in India, Eloise Cook,
Melanie Carter and Felicity Baines in Harlow, and Suzanne Pattinson in
Cambridge;
And last but certainly not least, the team at home: My wife Thalia and
daughters Poppy and Leone for their inspiration and help with technology!
The book is in memory of my parents.
 Publisher’s acknowledgements
xxiv Association of Investment Companies: AIC welcomes FCA’s Retail
Distribution Review call for input. (2019, May 1). AIC. Used with
permission from AIC; 2 Association of Investment Companies: What are
investment companies? AIC. Used with permission from AIC; 3 Association
of Investment Companies: How investment companies work. AIC. Used
with permission from AIC; 6 Association of Investment Companies:
Discounts and premiums. AIC. Used with permission from AIC; 10-13
Association of Investment Companies: AIC sector review. (2019, May 8).
AIC. Used with permission from AIC; 17 Association of Investment
Companies: Association of Investment Companies (AIC). Used with
permission from AIC; 19 Association of Investment Companies:
Henderson Smaller Companies. AIC. Used with permission from AIC; 24
The Financial Times: From Walters, L. (2011), ‘Fund performance tables
hide bad records’, Investors Chronicle, 19–25 August © The Financial Times
Ltd. 2019, All rights reserved. Used with permission from The Financial
Times Ltd; 27 Association of Investment Companies: Association of
Investment Companies (AIC) /Morningstar. Used with permission from AIC;
30 Thalia Baron: Cartoon by Thalia Baron. Used with permission from
Thalia Baron; 33 Association of Investment Companies: Association of
Investment Companies (AIC) /Morningstar Weighted averages. AIC. Used
with permission from AIC; 35-36 Association of Investment Companies:
AIC Ongoing Charges Calculation. AIC; 39 Association of Investment
Companies: Investment company H1 review: secondary fundraising hits
record. (2019, July 9). Used with permission from AIC; 42-43 Association
of Investment Companies: Association of Investment Companies (AIC)
/Morningstar (as at 14/08/19). Used with permission from AIC; 46
Association of Investment Companies: Investment company 2018 review.
(2018, December 18). Used with permission from AIC; 51-52 Investors
Chronicle magazine: From Investors Chronicle magazine, page 32, 17 May
2019; 57 Association of Investment Companies: Volatility. AIC. Used with
permission from AIC; 64 Association of Investment Companies: Risk
versus reward. AIC. Used with permission from AIC; 74 Association of
Investment Companies: Association of Investment Companies (AIC)
/Morningstar Date as at 14/08/2019. Used with permission from AIC; 77
Association of Investment Companies: Investment trust discounts since
May 2008. AIC. Used with permission from AIC; 80 Association of
Investment Companies: Discounts and premiums. AIC. Used with
permission from AIC; 89 Association of Investment Companies: Selection
of investment trusts and their discount control policies. AIC. Used with
permission from AIC; 91-92 Investec: Closed – end funds daily – Investec.
(2019, Jun 13). Used with permission from Investec; 94 Finsbury Growth &
Income Trust PLC: “Dividends.” Finsbury Growth & Income Trust PLC; 96
Association of Investment Companies: AIC Dividend hero. (2019, Jul 19).
AIC. Used with permission from AIC; 99 Aberdeen Japan Investment
Trust PLC: Aberdeen Japan Investment Trust PLC, Annual Report, 31
March 2019; 100 Finsbury Growth & Income Trust PLC: Finsbury
Growth & Income Trust plc dividend payments: FGT dividends; 107-109
Association of Investment Companies: The AIC Code of Corporate
Governance. (2019, Feb). Used with permission from AIC; 112 Baillie
Gifford & Co Limited: Schroder UK Growth Fund plc Annual Report and
Accounts; 124 Allianz Technology Trust PLC: Allianz Technology Trust
PLC, Factsheet 31 October 2019; 126 Investors Chronicle magazine: From
Investors Chronicle magazine, 26 July 2019; 129-132 Association of
Investment Companies: Winners of the AIC Shareholder Communication
Awards 2019. (2019, June 7). AIC. Used with permission from AIC; 139-145
Association of Investment Companies: Half of investment companies
managed by the same fund manager for more than 10 years. (2019, July 8).
AIC. Used with permission from AIC; 153 Nick Train, Finsbury Growth &
Income Trust: Nick train. Finsbury Growth & Income Trust (FGT). Used
with permission from FGT; 154 Janus Henderson Group plc: Neil Hermon
– Janus Henderson Investors. Used with permission from Janus Henderson
Group plc; 158 ICM Investment Management Limited: Charles Jillings.
Utilico Emerging Markets Trust plc. Used with permission from ICM
Limited; 163 Association of Investment Companies: Annabel Brodie-
Smith, Communications Director of the AIC. Used with permission from AIC;
166 The Financial Times: Kay, J. (2018, January 19). Risk, the retail
investor and disastrous new rules. © The Financial Times Ltd. 2019, All
rights reserved; 169 Jonathan Davis: Jonathan Davis, board director.
Investment-reader; 173 Alan Brierley: Alan Brierley, Investec Securities
Research; 178 John Lee: Lord John Lee, Trafford DL FCA; 180 The
Financial Times: John Hughman, Editor of Investors Chronicle. © The
Financial Times Ltd. 2019, All rights reserved. Used with permission from
The Financial Times Ltd; 181 BMO Global Asset Management: Stated
objective of the Foreign & Colonial Government Trust, 1868; 181
Association of Investment Companies: Newlands, J. (1997). Put not your
trust in money. London: Association of Investment Companies; 181 Will
Durant: From “The Map of Human Character” by Will Durant (November
18, 1945); 187 Association of Investment Companies: Just 26% of students
and 13% of graduates expect to pay back their student loan. (2019, July 22).
AIC; 196 Personal Investment Management and Financial Advice
Association: Current Asset Allocation – PIMFA – Building Personal
Financial Futures; 200 Association of Investment Companies: AIC
welcomes FCA’s Retail Distribution Review call for input. (2019, May 1).
Used with permission from AIC; 201 Association of Investment
Companies: AIC welcomes FCA platform report which should benefit
consumers. (2019, March 14). Used with permission from AIC; 203
Association of Investment Companies: 100% investment in investment
companies (%). AIC. Used with permission from AIC; 218 John Baron:
John Baron Portfolios – Diversification,
http://www.johnbaronportfolios.co.uk/site/Diversification.php; 227 Mark
Dampier: Mark Dampier, Research Director, Hargreaves Lansdown; 230
International Monetary Fund: The Arcane Art of Predicting Recessions –
By Prakash Loungani, Assistant to the Director, External Relations
Department, IMF. (2000, December 18); 231 The Economist Newspaper
Limited: A mean feat. (2016, January 9). The Economist Newspaper
Limited; 236 CFA Institute: Cremers, K. J. M., Fulkerson, J. A., & Riley, T.
B. (2018). Challenging the Conventional Wisdom on Active Management: A
Review of the Past 20 Years of Academic Literature on Actively Managed
Mutual Funds. SSRN Electronic Journal. doi: 10.2139/ssrn.3247356; 252
Bridgewater Associates, LP: Saphier, M., Karniol-Tambour, K., &
Margolis, P. (2019, Feb). Geographic Diversification Has Big Upside For
Investors. Bridgewater Associates, LP; 256 BlackRock, Inc: Blackrock
presentation on thematic investing in February 2019, Alistair Bishop. Used
with permission from BlackRock, Inc; 257 BlackRock, Inc: Alistair Bishop
at Blackrock. Used with permission from BlackRock, Inc; 266 John Baron:
Baron, J. (2019, February 7). Where are our pioneering giants? Used with
permission from John Baron; 269 John Baron: Baron, J. (2019, May 9). Do
not sell in May. Used with permission from John Baron; 272 John Baron:
Baron, J. (2019, August 8). Retaining faith in technology. Used with
permission from John Baron; 275 John Baron: Baron, J. (2019, October 10).
Patience is usually a virtue. Used with permission from John Baron.
 Foreword
In many respects, investment trusts remain the City’s best-kept secret.
Despite evidence confirming they perform better and are cheaper than the
unit trusts and open-ended investment companies (OEICs) which dominate
the nation’s investment and savings market, too many investors continue to be
unaware of them or think them too complex.
This is slowly changing. The introduction of the Retail Distribution Review
(RDR) in 2013 and other changes to financial regulation are proving to be
catalysts. Others include a far greater awareness of the many advantages of
investment trusts courtesy of the financial media and professional
organisations, including the Association of Investment Companies (AIC).
Investment trusts are emerging from the shadows although there is still some
way to go before they enter the investment ‘mainstream’.
At a time when there is sadly a growing financial ‘advice gap’ and the cost of
advice is rising, investors would benefit from better harnessing their
potential. This further edition of The Financial Times Guide to Investment
Trusts will help investors better understand investment trusts and how they
can be best harnessed to achieve financial objectives. Characteristics such as
their structure, gearing and discounts are explained, as are their more
nuanced characteristics which all help to determine how trusts perform and
are perceived.
The book also highlights the stepping stones to successful investing, the
principles of sound portfolio management, and how to construct and monitor
a trust portfolio. We at Equi believe such knowledge is not only important but
necessary. For the evidence suggests better investing can help to reduce
inequalities within society. Why else do the rich keep getting richer? We are
on a mission to both inform and help investors achieve better returns.
The final section of this guide will feature how we put theory into practice,
for actions speak louder than words. By way of illustration, the thinking and
strategy behind one of the nine real investment trust portfolios being managed
in real time on my company’s website will be explained in some detail,
together with the various factors we consider when selecting holdings.
If ever there was any doubt, knowledge continues to be the bedrock of
successful investing. This book aims to explain the potential of investment
trusts in a clear, concise and jargon-free manner. It shows their apparent
complexity is a myth – a myth which has tended to obscure the many merits of
investment trusts for too long. It is hoped readers will benefit from a better
understanding of the wonderful opportunities on offer.
 Introduction: The evolving
landscape of investment (trusts)
The investment (trust) landscape has continued to evolve at a clip since this
book was first published in 2013. Some aspects have changed for the better,
some not, and some are progressing albeit perhaps a little too gradually. As
with most things in the financial world, it’s a curate’s egg. The challenge is to
focus on those parts where improvements can be best made for the benefit of
investors.
What is undeniable is that those investors looking at investment trusts to help
them achieve financial goals are today fortunate in that the sector is now at
one of its pinnacles when viewed against its proud 150-year history.
Investment trusts are better poised than ever to play an even greater role in
helping informed investors achieve their financial goals.

The good
However, it remains a truism that too little is generally known about
investment trusts – they have yet to enter the investment ‘mainstream’. Why is
this the case? After all, they have been around for a very long time. Many can
trace their ancestry back to the nineteenth century. And over this period, they
have proved themselves not only to be perhaps the greatest innovation for
long-term investors, but also the most rewarding.
Some of them are very large with market capitalisations exceeding £8,000
million, whilst assets under management within the sector total around £200
billion. These are significant numbers. The largest, Scottish Mortgage Trust
(SMT), is now a constituent of the FTSE 100 index. Sections of the financial
press often talk about the merits of investment trusts, including their better
performance and cheaper fees when compared with the unit trusts that
dominate the retail market.
And yet, the typical investor is unaware or cautious of them. It is one reason
why, with the open-ended market valued recently by the Investment
Association (IA) at around £1.24 trillion, the investment trust sector is one-
sixth the size of open-ended funds (typically unit trusts and open-ended
investment companies), despite their longer history and superior
performance. So why is it so few investors outside the wealth managers in
the City and Edinburgh benefit from them? The answers are various.

Fewer hurdles
A common thread linking them has been a competitive landscape which was
tilted against investment trusts. This is now slowly changing. The key catalyst
has been new regulations introduced in 2013. Hitherto, many investors had
used an independent financial adviser (IFA) to help them run their portfolios.
Most of these professionals earned their money not by charging the client a
fee, but rather by receiving commission payments from the managers of the
products they sold to the client.
Investment trusts do not pay commission to IFAs. Open-ended funds such as
unit trusts did. As a result, there has been an in-built bias in favour of the
latter. Some clients may have thought they were getting ‘free’ advice as they
did not directly pay the fee. Most clients would have been aware of the
arrangement but perhaps hazy about the scale of commission paid to their
IFAs.
Much of this changed in January 2013 when new rules were introduced as a
result of the Retail Distribution Review (RDR). These rules banned
commissions. Instead, IFAs are expected to earn their fees by charging the
client directly themselves and up front. The fee may be an hourly charge
depending on the time spent or a fixed fee depending on the type of advice.
Whichever, the effect will be the same – fees will be paid directly by the
client.
One objective of the RDR is to make charges much more transparent. Another
is to eliminate potential conflict of interest claims against IFAs regardless of
how well they have served their clients. The jury is still out. But whether a
success or not, investment trusts will benefit. These trusts are now competing
with their open-ended cousins on a more level playing field. And, although it
is early days, there are encouraging indications that investors are benefitting
as a result.
Better awareness
However, this is only part of the story. Investment trusts have not always
been good at setting out their stall. They are a slightly more complex
instrument when compared with open-ended funds. And sometimes this
complexity has been exaggerated. Yet historically there have been few
marketing campaigns to put this right. Compare this to the massive marketing
by the unit trust industry, especially when the new ISA season approaches.
This failure to reach out to investors has not been helped by the odd bit of
bad publicity. Some investors will remember the split capital investment
trust scandal. During the late 1990s, these trusts were marketed as low-risk
investments, particularly for those seeking income. But high gearing and
intricate cross-holdings made for a volatile mix. The detail is unimportant,
but a number of investors lost out after the market crashed in 2001–2.
Though severe for those involved, the bad publicity was out of all proportion
to the scale of the affair. Only a few fund managers were felled by the
scandal, but it threw a dark shadow over most of the investment trust
industry. The episode seemed to confirm to many that investment trusts were
a ‘dark art’ best avoided. It certainly did not help the industry’s profile or
appeal to investors.
This environment is now slowly changing for the better. Investors are coming
to realise the many advantages of investment trusts. Progress is slow but it is
inexorable. There has been more coverage in the financial press highlighting
the better performance of investment trusts compared to their open-ended
cousins, and often by some margin. The press has also highlighted that
investment trusts are a cheaper way of gaining exposure to markets – an issue
of increasing importance. These two facts are not unrelated.
There has also been the sterling work of the Association of Investment
Companies (AIC), the industry’s well-respected trade body, which has done
much in recent years to inform and educate. A visit to its website is well
worthwhile. For example, the animated video entitled ‘Your investment
journey’, launched in October 2018, explains why and how to go about
investing and where investment trusts can fit in.

An evolving industry
The industry itself has continued to evolve. It has emerged from the split
capital crash with an endeavour wholly conducive to investors. Part of this
has been driven by necessity. The rise of passive low-cost instruments (such
as exchange-traded funds and index funds), together with activist investors
looking to crystallise undervalued situations, has spawned self-help and
innovation.
In responding to investors’ recent search for yield, a host of ‘alternative’
assets, including renewable energy and infrastructure, have been
encompassed by investment trusts as evidenced by the extent of fundraising.
Whilst such assets are now well-established, other examples including trusts
which aim to capitalise on recorded music rights and to provide capital to
biotech companies prove innovation is alive and kicking. Once again, such
examples are proving helpful to those investors seeking income and
diversification.
Following the crash, regulatory and governance changes have also assisted
the sector by helping to improve the way trusts are managed and by making it
easier for trust boards to market their company, issue new shares and pay
higher dividends out of capital, all of which benefit shareholders to varying
degrees.
In doing so, more investors are coming to appreciate trusts’ other helpful
features. These include the ability to ‘store’ dividends and so produce a
growing stream of income even when markets are rocky – helpful for long-
term planning. An increasing awareness that their structure is better suited to
certain illiquid asset classes, such as private equity and commercial
property, has helped – and funds have been raised accordingly from investors
from both established and new investment trusts.
The rise of more conventional equity IPOs (initial public offerings) has also
been a welcome feature in recent years. An IPO is the very first sale of stock
issued by a company to the public. Examples in 2018 saw Mobius Investment
Trust (MMIT), AVI Japan Opportunity Trust (AJOT), Baillie Gifford US
Growth Trust (USA) and Smithson Investment Trust (SSON) all be created
courtesy of fundraising, the latter raising a record £822 million.
Meanwhile, many well-respected investment trusts are raising their assets
under management and continuing to grow by initiating regular secondary
share issues courtesy of their share prices standing at premiums to their Net
Asset Value (NAV) because of investor demand. Perhaps the best example is
Scottish Mortgage Trust (SMT), which has raised over £600 million in
recent years. Other examples include Finsbury Growth & Income Trust
(FGT) and CC Japan Income & Growth (CCJI).
Although helped by favourable markets, little wonder total assets have now
doubled from the £100 billion under management since this book’s first
edition in 2013. Investment trusts are now being rewarded for their
endeavours, and this is beginning to combat the lack of knowledge that has
characterised attitudes. The momentum continues to move in their direction.
These are positive developments which are slowly benefitting investors.
However, the journey is ongoing – for not everything is as it should be.

The bad
Improvements apart, investment trusts still face headwinds. The Financial
Conduct Authority (FCA), the industry’s regulator, sometimes creates the
impression that trusts are of little interest to them – and, as such, may be
inadvertently allowing nuanced biases within the system to favour the open-
ended behemoths that are unit trusts.
This is not withstanding the fact that the FCA ushered in the RDR reforms
which aimed to remove the commission bias in favour of open-ended funds.
This was welcomed by investment trust supporters including myself. Yet their
focus on passive investment, while logical in one respect given the growth in
that business, is illogical in another in that it tends to marginalise the role of
trusts despite their superior track record.
Anomalies are therefore allowed to exist. For example, it appears the ability
to apportion any part of a defined-contribution (DC) pension plan to
investment trusts remains difficult. This is important given the forecast
growth in DC schemes to around £1 trillion by 2029. On balance, if
reasonable assets have already been accumulated, those investors wishing to
meaningfully embrace investment trusts would still be better to start or
transfer into a self-invested pension plan (SIPP). There is no logical reason
why this should be the case.
Similarly, research from the AIC last year found that, despite seven years
having passed since the introduction of the RDR rules, around just 5% of the
money invested on advisor platforms was accounted for by investment trusts.
Again, something is wrong when the best form of funds is being seconded by
inferior instruments. Despite the best of intentions, there remain biases
against trusts within the system.
It is therefore welcome news that the FCA launched in May 2019 its
‘Evaluation of the Retail Distribution Review and the Financial Advice
Market Review’ which seeks feedback to assess how effective RDR has
been in improving the distribution of financial services products to retail
investors and establish a more effective retail investment market.
Ian Sayers, Chief Executive of the Association of Investment Companies
(AIC) has said:
We welcome the FCA’s call for input in evaluating RDR. The changes RDR put in
place were a significant step in the right direction to improve financial advice to
retail investors. Purchases of investment companies by advisers and wealth
managers on adviser platforms have increased five-fold since RDR, from £219m in
2012 to nearly a billion in 2018.
However, there’s still more work to be done. The majority of advisors are not
recommending investment companies to their clients despite investment companies’
many benefits. We look forward to continuing to work with the FCA and
contributing to the call for input.
But perhaps the strongest evidence of any indifference shown towards
investment trusts from both sides of the Channel relates to the introduction of
the KID (Key Investor Document), which every trust has needed to produce
in addition to its own literature. KIDs have been the product of EU regulation
which attempts to help investors better understand what they are buying. This
heavy-handed regulation is well-intentioned but misleading to the point of
being dangerous.
It is misleading in assessing risk when comparing with unit trusts. The EU
regulations use different methodologies when measuring risk to the point that
investors could be led into believing investment trusts are less risky than unit
trusts. It is generally accepted that, because of their particular characteristics,
trusts are more volatile and therefore riskier in the short term but long-term
investors are prepared to accept this because of better returns.
The KID is also misleading in relation to the projection of future returns,
which are based simply on extrapolating recent returns. In a bull market, this
will suggest higher returns – and vice versa. A recent AIC report suggested
42 KIDs were forecasting 20%+ annual returns in the ‘moderate’
performance category. Such returns require accepting a decent level of risk.
If not stopped, it will encourage investors to ‘Buy high, sell low’, the exact
opposite of what they should be doing.
One could go on. Other misleading comparisons include comparing trusts to
similarly mandated ‘sister’ funds run by the same manager within the unit
trust sector. No wonder the major trade organisations have expressed
concern that these documents could cost investors dear. The AIC’s advice
regarding KIDs is to ‘burn before reading’. The FCA initially seemed
unwilling to intervene but relented by instigating a consultation (Call for
input) in 2018.
It was therefore welcome that, in announcing its findings in March 2019, the
FCA agreed that the summary risk indicators and performance scenarios in
KIDs can indeed be misleading, and that the regulation could cause consumer
harm. Its intention is to press the EU to think again. This is welcome but it
will take time. The FCA needs to act promptly if investors are not to be
misled into making ill-informed decisions.
Last year I met with Andrew Bailey, the then Chief Executive of the FCA,
who readily agreed the KIDs regulations could then be misleading and
detrimental to investors. However, its problem was that its hands are bound
by EU regulations whilst the UK remains a member of the EU. The FCA fully
understands that it has a duty to protect investors, given that it knows the
regulation is flawed due to its own findings regarding consumer harm and the
conclusion of others including the AIC.
The FCA has consulted its lawyers on the issue but promised to see what
more it could do. The general consensus was that the EU had not been
receptive to concerns expressed in various representations by the UK. The
FCA would continue to lobby the EU to address these problems – investment
trusts not being well understood or used on the continent.
The FCA also understands the need to be ready to replace or improve these
regulations, and amend the guidance regarding the KIDs, once they become
the responsibility of the UK upon our exit. The FCA acknowledged this point.
It was emphasised that time was of the essence. The FCA promised to work
closely with the AIC and other bodies to explore options. Regulations set
elsewhere are rarely an easy task.
I have also raised these issues with ministers (including the very capable
John Glen MP, the Economic Secretary to the Treasury) both in Parliamentary
committees and in private. The Government correctly says this is a role for
the FCA to oversee. Yet Government also has a responsibility. If it wants
people to take on greater responsibility for their financial futures, then they
must be able to rely on the relevant information when making decisions. This
information is ultimately its responsibility.
Time will tell whether these and other industry representations have the
desired effect. Meanwhile, after a tsunami of complaints, the FCA has
allowed trust boards to provide additional information if they believe their
KID is misleading. This may just be an acceptable sticking plaster so long as
a more fundamental reassessment of the necessity of KIDs is quickly
undertaken. But this remains regulation born out of ignorance.

And the ugly – towards a better place

There is one further factor in this changing landscape. There is a growing
realisation – in part driven by ageing demographics and poor finances – that
the country’s population needs to do more for itself in financially preparing
for later life. This comes at a time when there is an increasing awareness that
globalisation has left large swathes of the population behind and that
inequalities have widened. The two may become symbiotic as there is
evidence to suggest better investing can help to reduce inequalities.
The pressure is on government finances, and this will not change for decades
to come. The penny has dropped and various government initiatives abound.
One example is the subtle yet significant changes to the inflation indexing of
state pensions. Government work pension policies and allowing greater
pension freedoms in later life are other examples. More effort to teach basic
finance to school students is yet another.
In addition, people are finding it harder to access debt. The financial
‘system’ continues to be unsympathetic and this is likely to continue for some
time. Bank lending to businesses and individuals remains fairly tight as they
continue to repair their balance sheets and mitigate against future risk.
Interest rates on credit cards remain stubbornly high despite their present
level in the wider economy.
Furthermore, the financial climate is less sympathetic in another sense – less
tangible, but important all the same. Because of recent events, including the
financial crisis, today’s generation is more questioning. There used to be an
almost unshakeable belief that house prices would forever rise, pensions
were worthwhile, and that banks were trustworthy. Not today. This is feeding
into the view that more self-help is necessary.
And yet this is happening at a time when there appears to be a growing
‘advice gap’ in the financial services sector. Many high street banks no
longer offer financial advice for customers with modest sums to invest. The
wealth managers continue to raise their minimums when it comes to
accepting clients. And RDR, whilst levelling the playing field for investment
trusts, is resulting in fewer investors seeking guidance from independent
financial advisers (IFAs) because fees are now being charged directly.
Indeed, a few years ago, a survey quoted in the Investors Chronicle which
found that two-thirds of IFAs said it would not be profitable to advise clients
with less than £50,000 to invest. And yet it is precisely these people who
need good financial advice – just as much if not more so than wealthier
clients.

Costs
The financial industry is attempting to respond with various (usually
technology-led) initiatives but then the serious issue of cost comes into view.
Some reports have recently suggested that the variation in possible fees
charged is enormous. One recent report asked over a hundred advisers what
their charges were for a variety of scenarios. The quotes for advising
someone about drawing an income ranged from £500 to £5,000. Advice for a
young parent looking to save for their child’s university education varied
from £300 to £2,500.
Trying to compare advisers is notoriously difficult. Personal circumstances
are a factor: how much money is being invested, what percentage of one’s
wealth the invested sum represents, and what detail by way of advice is
required. Is such advice ‘restricted’? Is the adviser only able to recommend
specific products courtesy of their employer? And is an IFA authorised and
regulated by the FCA? (It’s always worth checking on its register.)
If IFAs are not the answer, then what is? There are various alternatives, some
website-based and the more traditional avenues including the City’s wealth
managers (more on this later in the book) for investors willing to hand over a
sum of money. The reason for mentioning it here is the cost in relation to the
growing advice gap.
The different avenues to market for an average investor vary from around 1%
to 1.5% for standardised portfolios, offered by the website-based solutions,
to between 2% and 2.5% (higher in the first year because of set-up costs) for
the more traditional wealth management service (including tax advice)
provided the portfolio is of a certain size. Such percentages could easily
represent around half of an investor’s portfolio yield.
Little wonder more and more people are now contemplating ‘DIY investing’
– whether through circumstance or choice. There appears to be a growing
tendency by investors to apportion tasks and fees accordingly. Good tax
advice and lunches are usually worth paying for, but why allow such services
to disproportionately add to the cost of the most important component of
wealth management – that of securing handsome returns over time from
portfolio investment?
For example, our website-based service reports to members on the progress
of our nine real investment trust portfolios, including a five portfolio risk-
adjusted journey which caters for those first starting to invest to those in
retirement wishing to draw a healthy income whilst preserving capital. The
total cost for annual membership is £192 (including VAT). This then allows
scope for members to purchase specialist add-on services (tax advice, for
example) from elsewhere as circumstances require.

Addressing inequality
Meanwhile, on a different yet related note, interesting research in 2017 has
confirmed what we knew instinctively, but had yet to see the substantive
evidence – that better investing can help to solve inequality. The Stockholm
School of Economics measured the performance of different income groups
over time. These wealth surveys are some of the most reliable in the world
because Swedish households have to report their total wealth.
The report found that the top 5 to 10% of households earned 2.7% a year
more than the median household. The top 0.1% did best of all by
outperforming the median household by 6.1% a year. Given the reliability of
the data and there being no reason to suggest the findings would be any
different elsewhere, it confirms that the rich indeed do better than the average
and that the richer they are the better they do.
Interestingly, there is no evidence that the rich are better investors in the
sense of having better investment strategies and stock picking skills, or
timing the market. What the report did find is that the rich are more prepared
to take on risk in the form of financial investments per se, notably equities
and private investments. The median household had most of its wealth
wrapped up in its property, with only 21% of its net worth invested in ‘risky’
assets. By contrast, that figure rose to 62% for the top 5 to 10% of
households and 95% for the top 0.1%.
This explains why the rich get richer. Over time, a properly managed
portfolio of different assets, including equities and those less correlated for
reasons of diversification, will in most cases do better than average house
prices. And the more risk that is taken, the higher those returns should be,
provided a long-term view is taken and volatility is accepted. Such a journey
is seldom smooth.
But how best to achieve this worthy goal of encouraging the average
household to take on more risk at a time when the ‘advice gap’ seems to be
getting bigger. On one side of the equation, in addition to the policies
mentioned earlier, governments should do more via tax breaks to encourage
investment via pensions and ISAs. In part, the flow has been somewhat the
other way of late. Radical options like no longer exempting main homes from
CGT could further level the playing field between different types of
investment.
Whatever the policies, this fast-evolving investment landscape will require
better investing by those who are less wealthy. This is crucial to reducing the
equalities in our society. And in the search for more cost-effective and better
returns, investment trusts are well-placed. For too long investment trusts
have largely remained the City’s best-kept secret. This is now changing. The
challenge is to explain clearly how they work and how they can best serve
investors.

This book
It is hoped that The Financial Times Guide to Investment Trusts will play a
small part in achieving this goal. The first section of the book (Chapters 1 to
9) explains what trusts are, their pros and cons (including performance, fees,
discounts, ability to borrow and structure), and how they differ from unit
trusts and OEICs. It will also examine some of the more nuanced
characteristics and factors influencing investment trust selection, in order to
help investors make informed investment decisions and better monitor their
own fund manager.
Having examined investment trusts in isolation, the second section (Chapters
10 to 14) attempts to set a broader narrative. How should investors discern
between them? What makes the case for one trust over another? What are the
sector’s current trends and topical issues? How have respected experts best
approached their role and where do they see the sector in five to ten years?
And what advice do they have for investors?
Chapter 10 considers the various factors which are useful when comparing
and selecting investment trusts. Chapters 11 to 13 then feature perspectives
from a broad range of experts – all respected professionals in their particular
fields. Their insights reflect the depth of experience and diversity of the
positions held. Such issues are important in themselves. But they are doubly
so when constructing a portfolio, given there are always competing factors
and trusts to consider.
The third section (Chapters 14 to 20) addresses the starting blocks when
commencing an investment journey, the importance of mapping out financial
objectives, the principles of successful investing and the nuances of portfolio
construction. Finally, as a way of illustrating the key themes of the book, it
talks through the thinking and strategy behind one of the nine real investment
trust portfolios run in real time on our company’s website. There is no better
way of sharing how best to put theory into practice.
Readers should be aware that, when referring to individual investment trusts,
the book will detail the stock market code in brackets immediately following
the name for easy reference when seeking the trust on an investment platform.
For example, Finsbury Growth & Income Trust (FGT). It will also at times
refer to investment trusts as simply ‘companies’ or ‘investment companies’.
It is hoped this book achieves its objective of helping readers to better
understand the wonderful opportunities which investment trusts can offer
long-term investors. Trusts are now better placed than they have been for a
long time to help investors achieve their financial goals, standing as they do
at a zenith despite their proud history. All it requires is a little patience to
better understand them, and then patience when investing to best reap their
rewards. I wish you well with your investments.
 1
What are investment trusts?
Investment trusts (also called ‘investment companies’ or ‘companies’) are
like other public-quoted or listed companies such as Shell or Glaxo, but
instead of managing oil or pharmaceuticals they manage investments on
behalf of their shareholders. These investments can span a broad range of
financial assets, such as equities or bonds, and physical assets such as
property. Whatever the type of investment, the idea is that investors gain
exposure to a balanced portfolio of assets which is professionally run.
This form of ‘collective fund’ has proved a popular way for investors to
invest their savings. Trusts have been around for a long time. The first,
Foreign & Colonial, was established in 1868. Today there are over 400
investment trusts in total managing around £190 billion of assets. The largest,
Scottish Mortgage Trust, is a constituent of the FTSE 100 index and there are
quite a few trusts which manage assets of over £1 billion in size.
Investment trusts possess an excellent performance record relative to both
unit trusts and relevant benchmarks, but they also have a slightly more
complex structure in comparison. This presents an opportunity for those
investors who take the time to understand them. The effort can be very
rewarding.

Structure and gearing

Most investors will have at least some element of their portfolios invested in
funds. The concept is simple. An investor will join other investors in pooling
their money and, in effect, giving it to a fund manager to invest. Such an
approach is sensible as it means investors can access a diversified portfolio
and so lower risk, whilst the costs are lower because they have been shared.

Figure 1.1 How a collective fund works

Source: AIC

Most funds are unit trust or OEICs – both being ‘open-ended’. These are so-
called because when any investor buys or sells them, they are directly adding
or subtracting from the pot of money invested in that fund and managed by the
manager. Assets will need to be bought and sold, depending on cash levels.
In doing so, as investors buy and sell, they are creating or cancelling shares
in line with investor demand.
Table 1.1 Open-ended funds

Before purchase Purchase After purchase

Fund size = Investor buys 10,000 units at £1 Fund size = £1,010,000
£1,000,000 each
1,000,000 units in 1,010,000 units in issue
issue
Therefore each unit = Therefore each unit =
£1 £1

There are also funds called investment trusts. These are listed or public
companies and as such are ‘closed-end’ in that they have a fixed number of
shares: they are ‘closed’ after the initial launch or share issue. Their shares
are listed and traded on the stock exchange like other public companies such
as Shell, M&S and Glaxo.
Figure 1.2 How an investment company works
Source: AIC

So, instead of specialising in the management of oil, clothes or

pharmaceuticals, investment trusts specialise in the management of
portfolios, typically of other quoted companies. Their purpose is to make
profitable investments in financial assets for the benefit of their shareholders.
By buying the shares in Shell, M&S and Glaxo, an investor is not adding
more oil, clothes or drugs for the company to manage. That is for their
managements to decide. Likewise, buying the shares of an investment trust
does not add to the size of the portfolio. An investor is simply buying part
ownership of the company itself – not adding to the underlying portfolio – in
the hope of profiting from its successful management.
Table 1.2 Closed-ended funds

Before purchase Purchase After purchase

Portfolio size = Investor buys 10,000 shares through Portfolio size =
£1,000,000 the stock market £1,000,000
1,000,000 shares 1,000,000 shares in
in issue issue
Price – demand Share price continues
and supply to reflect demand and
supply

If Shell, M&S and Glaxo manage and grow their assets well and profits
increase as a result, all things being equal, this will be reflected in a rising
share price to the benefit of the shareholders who own the shares. Whether
these companies succeed will depend on a number of factors, such as the
economic environment, the business model, their competitiveness and, above
all, the quality of the management team.
Similarly, investment trusts strive to grow the value of their portfolio of
stocks. Success or failure will eventually be reflected in the share price of
the trust – just as it will be with other companies. Factors such as the
economy, the method of research, stock selection and the investment acumen
of the manager will all play their part.

Being closed-end, investment trusts can and do borrow to enhance the returns
achieved on their portfolio of assets. This is called ‘gearing’. Provided the
portfolio rises in value more than the cost of the borrowing, then the gearing
will produce higher returns – and vice versa. Investment trusts are typically
5–15% geared. This has tended to be beneficial given that markets have risen
over time.
Figure 1.3 How closed-end and open-ended funds compare

Value and calculations

In the case of investment trusts, the assets are the portfolio holdings. A
common way of pricing this value for each trust is by referring to the Net
Asset Value (NAV), the net value of the portfolio’s assets (after including
cash and deducting debt) divided by the number of shares in issue.

By way of example, let us assume that today the total value of ABC
investment trust’s portfolio of shares and cash is £100 million – there being
no debt. There are 100 million shares of ABC in issue. The NAV is therefore
£1.00 (£100 million value divided by 100 million shares). If, in future, the
value of the underlying portfolio was to rise to £120 million because the
portfolio had risen, then the NAV would rise to £1.20.
The NAV is a useful way of relating the value of the portfolio to the share
price and is one of the factors closely watched by investors when evaluating
an investment trust. The NAV should be used when comparing performance
within a trust’s peer group and with unit trusts.

Discounts and premiums

Being closed-end, and therefore having a fixed number of shares, the share
price of an investment trust is not dictated by the underlying value of the
assets under management (the NAV) but rather by the extent to which
investors wish to own the shares of the trust itself. Trading in the shares does
not affect the value of the NAV as is the case with unit trusts.

As such, the share price can be more or less than the NAV. If it is less, the
trust is said to be trading at a discount (see Table 1.3). Most investment
trusts trade at a discount to NAV. Presently, discounts average between 5–
10%. This effectively means that an investor is buying £1’s worth of assets
for 90–95p.

Table 1.3 How discounts/premiums are calculated

Source: AIC

This discount reflects the fact that historically institutions have been sellers
and that costs would be incurred if an investment trust was to be wound up. It
may also reflect the fact that investment trust prices can be a little more
volatile than those of open-ended funds. This is because their price is not
only affected by movements in their NAV (like open-ended funds) but also by
movements in the discount (unlike open-ended funds). Investors may
therefore be seeking compensation or a margin of comfort for holding
investment trust shares.
A discount to NAV is not necessarily an opportunity. A large discount may,
for example, also reflect low confidence in the fund manager – perhaps
because of poor performance – or a dislike of the trust’s focus on a particular
region or sector. It can also reflect the fact that the investment trust is not
communicating its investment strategy well to the market. Investors do not
like uncertainty.

If the share price is more than the NAV of the underlying portfolio, then the
trust is said to trade at a premium. There may be a good reason – the fund
manager may be well respected or the underlying focus of the portfolio may
be very much in fashion. But investors should be aware that, as buyers, they
are effectively paying more in order to obtain exposure than investors who
buy at discount.
Figure 1.4 NAV and share price

The fact that share prices trade at discounts or premiums to NAV can present
both opportunities and risks for investors. Such valuations are a key
determinant in deciding whether trusts represent good value at any given
point. This is something covered in later chapters. For the moment it is
important to recognise that the characteristic of discounts and premiums does
not exist with unit trusts and OEICs, and that investment trust shares are
traded by investors so their prices will vary depending on supply and
demand.

Price and size

Being public companies, the price of investment trusts is decided by how
keen investors are to own the shares – there being a limited number. As with
the price of most things in limited supply, the price will rise if there are more
buyers than sellers, and vice versa.
By comparison, being ‘open-ended’, there is no limit on how many shares (or
units) can be created by unit trusts or OEICs if the demand exists. Prices are
dictated directly by the value of the underlying portfolio and not by investor
demand. The individual unit price is decided by the value of the fund divided
by the number of units in existence, and not by the extent to which investors
want to own the shares.

Being public companies, the size of investment trusts in terms of market

capitalisation is therefore decided by the number of shares in issue
multiplied by the price of those shares. For example, if XYZ investment trust
has 100 million shares in issue, a share price of £1.50 equates to a market
cap of £150 million. By comparison, the size of unit trusts and OEICs is
decided by how much money investors have placed in that particular fund.

Investment trusts vary in size enormously. The largest have a market

capitalisation of around £8,000 million, whilst some of the smallest come in
under £10 million. The larger ones tend to have a global remit and access all
the major markets. These are typically suitable for investors with smaller
portfolios who may just want to start with a few trust holdings. The smaller
trusts tend to have more specialist briefs such as smaller companies, bonds
or any number of alternative asset classes.

Range and reach

All public and listed companies invest in and manage a portfolio of assets
appropriate to their remit. Just as Shell specialises in a range of assets
related to oil and energy, and M&S in clothes and food, different investments
Another random document with
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place them on a new theoretical basis. That basis, in accordance
with the general advance of thought, was supplied by religion.
Sexual relations which had once been condemned as wrong and
unnatural because they were supposed to thwart the natural
multiplication of animals and plants and thereby to diminish the food
supply, would now be condemned because it was imagined that they
were displeasing to gods or spirits, those stalking-horses which
savage man rigs out in the cast-off clothes of his still more savage
ancestors. The moral practice would therefore remain the same,
though its theoretical basis had been shifted from magic to religion.
In this or some such way as this we may conjecture that the Karens,
Dyaks, and other savages reached those curious conceptions of
sexual immorality and its consequences which we have been
considering. But from the nature of the case the development of
moral theory which I have sketched is purely hypothetical and hardly
admits of verification.
However, even if we assume for a moment that
But the reason why the savages in question reached their present
savages came to
regard certain view of sexual immorality in the way I have
sexual relations as surmised, there still remains the question, How did
irregular and they originally come to regard certain relations of
immoral remains
obscure. the sexes as immoral? For clearly the notion that
such immorality interferes with the course of
nature must have been secondary and derivative: people must on
independent grounds have concluded that certain relations between
men and women were wrong and injurious before they extended the
conclusion by false analogy to nature. The question brings us face to
face with the deepest and darkest problem in the history of society,
the problem of the origin of the laws which still regulate marriage and
the relations of the sexes among civilized nations; for broadly
speaking the fundamental laws which we recognize in these matters
are recognized also by savages, with this difference, that among
many savages the sexual prohibitions are far more numerous, the
horror excited by breaches of them far deeper, and the punishment
inflicted on the offenders far sterner than with us. The problem has
often been attacked, but never solved. Perhaps it is destined, like so
many riddles of that Sphinx which we call nature, to remain for ever
insoluble. At all events this is not the place to broach so intricate and
profound a discussion. I return to my immediate subject.
In the opinion of many savages the effect of
Sexual immorality is sexual immorality is not merely to disturb, directly
thought by many
savages to injure or indirectly, the course of nature by blighting the
the delinquents crops, causing the earth to quake, volcanoes to
themselves, their vomit fire, and so forth: the delinquents
offspring, and their
innocent spouses. themselves, their offspring, or their innocent
spouses are supposed to suffer in their own
persons for the sin that has been committed. Thus among the
Baganda of Central Africa “adultery was also regarded as a danger
to children; it was thought that women who were guilty of it during
pregnancy caused the child to die, either prior to birth, or at the time
of birth. Sometimes the guilty woman would herself die in childbed;
or, if she was safely delivered, she would have a tendency to devour
her child, and would have to be guarded lest she should kill it.”103.1
“When there was a case of retarded delivery, the relatives attributed
it to adultery; they made the woman confess the name of the man
with whom she had had intercourse, and if she died, her husband
was fined by the members of her clan, for they said: ‘We did not give
our daughter to you for the purpose of adultery, and you should have
guarded her.’ In most cases, however, the medicine-men were able
to save the woman’s life, and upon recovery she was upbraided, and
the man whom she accused was heavily fined.”103.2 The Baganda
thought that the infidelity of the father as well as of the mother
endangered the life of the child. For “it was also supposed that a
man who had sexual intercourse with any woman not his wife, during
the time that any one of his wives was nursing a child, would cause
the child to fall ill, and that unless he confessed his guilt and
obtained from the medicine-man the necessary remedies to cancel
the evil results, the child would die.”103.3 The common childish
ailment which was thought to be caused by the adultery of the father
or mother was called amakiro, and its symptoms were well
recognized: they consisted of nausea and general debility, and the
only cure for them was a frank confession by the guilty parent and
the performance of a magical ceremony by the medicine-man.103.4
 Similar views as to the disastrous effects of
Disastrous effects adultery on mother and child seem to be
of adultery on
adulteress and her widespread among Bantu tribes. Thus among the
child. Awemba of Northern Rhodesia, when both mother
and child die in childbirth, great horror is
expressed by all, who assert that the woman must assuredly have
committed adultery with many men to suffer such a fate. They exhort
her even with her last breath to name the adulterer; and whoever is
mentioned by her is called the “murderer” (musoka) and has
afterwards to pay a heavy fine to the injured husband. Similarly if the
child is born dead and the mother survives, the Awemba take it for
granted that the woman has been unfaithful to her husband, and
they ask her to name the murderer of her child, that is, the man
whose guilty love has been the death of the babe.104.1 In like manner
the Thonga, a Bantu tribe of South Africa, about Delagoa Bay, are of
opinion that if a woman’s travail pangs are unduly prolonged or she
fails to bring her offspring to the birth, she must certainly have
committed adultery, and they insist upon her making a clean breast
as the only means of ensuring her delivery; should she suppress the
name even of one of several lovers with whom she may have gone
astray, the child cannot be born. So convinced are the women of the
sufferings which adultery, if unacknowledged, entails on the guilty
mother in childbed, that a woman who knows her child to be
illegitimate will privately confess her sin to the midwife before she is
actually brought to bed, in the hope thereby of alleviating and
shortening her travail pangs.104.2 Further, the
Sympathetic
relation between an
Thonga believe that adultery establishes a
adulterer and the physical relationship of mutual sympathy between
injured husband. the adulterer and the injured husband such that
the life of the one is in a manner bound up with the
life of the other; indeed this relationship is thought to arise between
any two men who have had sexual connexion with the same woman.
As a native put it to a missionary, “They have met together in one life
through the blood of that woman; they have drunk from the same
pool.” To express it otherwise, they have formed a blood covenant
with each other through the woman as intermediary. “This
establishes between them a most curious mutual dependence:
should one of them be ill, the other must not visit him; the patient
might die. If he runs a thorn into his foot, the other must not help him
to extract it. It is taboo. The wound would not heal. If he dies, his
rival must not assist at his mourning or he would die himself.” Hence
if a man has committed adultery, as sometimes happens, with one of
his father’s younger wives, and the father dies, his undutiful son may
not take the part which would otherwise fall to him in the funeral
rites; indeed should he attempt to attend the burial, his relations
would drive him away in pity, lest by this mark of respect and
perhaps of remorse he should forfeit his life.105.1 In
Injurious effects of
adultery on the
like manner the Akikuyu of British East Africa
innocent husband, believe that if a son has adulterous intercourse
wife, or child. with one of his father’s wives, the innocent father,
not the guilty young scapegrace, contracts a
dangerous pollution (thahu), the effect of which is to make him ill and
emaciated or to break out into sores or boils, and even in all
probability to die, if the danger is not averted by the timely
intervention of a medicine-man.105.2 The Anyanja of British Central
Africa believe that if a man commits adultery while his wife is with
child, she will die; hence on the death of his wife the widower is often
roundly accused of having killed her by his infidelity.105.3 Without
going so far as this, the Masai of German East Africa hold that if a
father were to touch his infant on the day after he had been guilty of
adultery, the child would fall sick.105.4 According to the Akamba of
British East Africa, if a woman after giving birth to a child is false to
her husband before her first menstruation, the child will surely
die.105.5 The Akamba are also of opinion that if a
Injurious effects of
incest on the
woman is guilty of incest with her brother she will
offspring. be unable to bring to the birth the seed which she
has conceived by him. In that case the man must
purge his sin by bringing a big goat to the elders, and the woman is
ceremonially smeared with the contents of the animal’s stomach.106.1
Among the Washamba of German East Africa it happened that a
married woman lost three children, one after the other, by death. A
diviner being called in to ascertain the cause of this calamity,
attributed it to incest of which she had been accidentally guilty with
her father.106.2
Again, it appears to be a common notion with
Wife’s infidelity at savages that the infidelity of a wife prevents her
home thought to
endanger the husband from killing game, and even exposes him
absent husband in to imminent risk of being himself killed or wounded
the chase or the by wild beasts. This belief is entertained by the
war.
Wagogo and other peoples of East Africa, by the
Moxos Indians of Bolivia, and by Aleutian hunters of sea-otters. In
such cases any mishap that befalls the husband during the chase is
set down by him to the score of his wife’s misconduct at home; he
returns in wrath and visits his ill-luck on the often innocent object of
his suspicions even, it may be, to the shedding of her blood.106.3
While the Huichol Indians of Mexico are away seeking for a species
of cactus which they regard as sacred, their women at home are
bound to be strictly chaste; otherwise they believe that they would be
visited with illness and would endanger the success of the men’s
expedition.106.4 An old writer on Madagascar tells us that though
Malagasy women are voluptuous they will not allow themselves to be
drawn into an intrigue while their husbands are absent at the wars,
for they believe that infidelity at such a time would cause the absent
spouse to be wounded or slain.106.5 The Baganda of Central Africa
held similar views as to the fatal effect which a wife’s adultery at
home might have on her absent husband at the wars; they thought
that the gods resented her misconduct and withdrew their favour and
protection from her warrior spouse, thus punishing the innocent
instead of the guilty. Indeed, it was believed that if a woman were
even to touch a man’s clothing while her husband was away with the
army, it would bring misfortune on her husband’s weapon, and might
even cost him his life. The gods of the Baganda were most particular
about women strictly observing the taboos during their husbands’
absence and having nothing to do with other men all that time. On
his return from the war a man tested his wife’s fidelity by drinking
water from a gourd which she handed to him before he entered his
house. If she had been unfaithful to him during his absence, the
water was supposed to make him ill; hence should it chance that he
fell sick after drinking the draught, his wife was at once clapped into
the stocks and tried for adultery; and if she confessed her guilt and
named her paramour, the offender was heavily fined or even put to
death.107.1 Similarly among the Bangala or the Boloki of the Upper
Congo, “when men went to fight distant towns their wives were
expected not to commit adultery with such men as were left in the
town, or their husbands would receive spear wounds from the
enemy. The sisters of the fighters would take every precaution to
guard against the adultery of their brothers’ wives while they were on
the expedition.”107.2 So among the Haida Indians of the Queen
Charlotte Islands, while the men were away at the wars, their wives
“all slept in one house to keep watch over each other; for, if a woman
were unfaithful to her husband while he was with a war-party, he
would probably be killed.”107.3 If only King David had held this belief
he might have contented himself with a single instead of a double
crime, and need not have sent his Machiavellian order to put the
injured husband in the forefront of the battle.107.4
The Zulus imagine that an unfaithful wife who
Injurious effect of touches her husband’s furniture without first eating
wife’s infidelity on
her husband. certain herbs causes him to be seized with a fit of
coughing of which he soon dies. Moreover, among
the Zulus “a man who has had criminal intercourse with a sick
person’s wife is prohibited from visiting the sick-chamber; and, if the
sick person is a woman, any female who has committed adultery
with her husband must not visit her. They say that, if these visits ever
take place, the patient is immediately oppressed with a cold
perspiration and dies. This prohibition was thought to find out the
infidelities of the women and to make them fear discovery.”108.1 For a
similar reason, apparently, during the sickness of a
African chiefs Caffre chief his tribe was bound to observe strict
thought to be
injuriously affected continence under pain of death.108.2 The notion
by the incontinence seems to have been that any act of incontinence
of their subjects.
would through some sort of magical sympathy
prove fatal to the sick chief. The Ovakumbi, a tribe in the south of
Angola, think that the carnal intercourse of young people under the
age of puberty would cause the king to die within the year, if it were
not severely punished. The punishment for such a treasonable
offence used to be death.108.3 Similarly, in the kingdom of Congo,
when the sacred pontiff, called the Chitomé, was going his rounds
throughout the country, all his subjects had to live strictly chaste, and
any person found guilty of incontinence at such times was put to
death without mercy. They thought that universal chastity was
essential to the preservation of the life of the pontiff, whom they
revered as the head of their religion and their common father.
Accordingly when he was abroad he took care to warn his faithful
subjects by a public crier, that no man might plead ignorance as an
excuse for a breach of the law.108.4
Speaking of the same region of West Africa, an
Injurious effects of old writer tells us that “conjugal chastity is
adultery on the
adulteress. singularly respected among these people; adultery
is placed in the list of the greatest crimes. By an
opinion generally received, the women are persuaded that if they
were to render themselves guilty of infidelity, the greatest
misfortunes would overwhelm them, unless they averted them by an
avowal made to their husbands, and in obtaining their pardon for the
injury they might have done.”109.1 The Looboos of
Dangerous pollution
supposed to be
Sumatra think that an unmarried young woman
incurred by who has been got with child falls thereby into a
unchastity. dangerous state called looï, which is such that she
spreads misfortune wherever she goes. Hence
when she enters a house, the people try to drive her out by
force.109.2 Amongst the Sulka of New Britain unmarried people who
have been guilty of unchastity are believed to contract thereby a fatal
pollution (sle) of which they will die, if they do not confess their fault
and undergo a public ceremony of purification. Such persons are
avoided: no one will take anything at their hands: parents point them
out to their children and warn them not to go near them. The
infection which they are supposed to spread is apparently physical
rather than moral in its nature; for special care is taken to keep the
paraphernalia of the dance out of their way, the mere presence of
persons so polluted being thought to tarnish the paint on the
instruments. Men who have contracted this dangerous taint rid
themselves of it by drinking sea-water mixed with shredded coco-nut
and ginger, after which they are thrown into the sea. Emerging from
the water they put off the dripping clothes which they wore during
their state of defilement and cast them away. This purification is
believed to save their lives, which otherwise must have been
destroyed by their unchastity.109.3 Among the Buduma of Lake Chad,
in Central Africa, at the present day “a child born out of wedlock is
looked on as a disgrace, and must be drowned. If this is not done,
great misfortunes will happen to the tribe. All the men will fall sick,
and the women, cows and goats will become barren.”110.1
These examples may suffice to shew that
Conclusion. among many races sexual immorality, whether in
the form of adultery, fornication, or incest, is
believed of itself to entail, naturally and inevitably, without the
intervention of society, most serious consequences not only on the
culprits themselves, but also on the community, often indeed to
menace the very existence of the whole people by destroying the
food supply. I need hardly remind you that all these beliefs are
entirely baseless; no such consequences flow from such acts; in
short, the beliefs in question are a pure superstition. Yet we cannot
doubt that wherever this superstition has existed it must have served
as a powerful motive to deter men from adultery, fornication, and
incest. If that is so, then I think I have proved my third proposition,
which is, that among certain races and at certain times superstition
has strengthened the respect for marriage, and has thereby
contributed to the stricter observance of the rules of sexual morality
both among the married and the unmarried.
 V.
RESPECT FOR HUMAN LIFE

I pass now to my fourth and last proposition, which

Superstition as a is, that among certain races and at certain times
prop to the security
of human life. superstition has strengthened the respect for
human life and has thereby contributed to the
security of its enjoyment.
The particular superstition which has had this
The fear of ghosts. salutary effect is the fear of ghosts, especially the
ghosts of the murdered. The fear of ghosts is
widespread, perhaps universal, among savages; it is hardly extinct
among ourselves. If it were extinct, some learned societies might put
up their shutters. Dead or alive, the fear of ghosts has certainly not
been an unmixed blessing. Indeed it might with some show of
reason be maintained that no belief has done so much to retard the
economic and thereby the social progress of mankind as the belief in
the immortality of the soul; for this belief has led race after race,
generation after generation, to sacrifice the real wants of the living to
the imaginary wants of the dead. The waste and destruction of life
and property which this faith has entailed are enormous and
incalculable. Without entering into details I will
Disastrous illustrate by a single example the disastrous
consequences
entailed by the fear economic, political, and moral consequences
of the dead. which flow from that systematic destruction of
property which the fear of the dead has imposed
on many races. Speaking of the Patagonians, the well-informed and
intelligent traveller d’Orbigny observes: “They have no laws, no
punishments inflicted on the guilty. Each lives as he pleases, and the
greatest thief is the most highly esteemed, because he is the most
dexterous. A motive which will always prevent them from
abandoning the practice of theft, and at the same time will always
present an obstacle to their ever forming fixed settlements, is the
religious prejudice which, on the death of one of their number,
obliges them to destroy his property. A Patagonian, who has
amassed during the whole of his life an estate by thieving from the
whites or exchanging the products of the chase with neighbouring
tribes, has done nothing for his heirs; all his savings are destroyed
with him, and his children are obliged to rebuild their fortunes afresh,
—a custom which, I may observe in passing, is found also among
the Tamanaques of the Orinoco, who ravage the field of the
deceased and cut down the trees which he has planted;112.1 and
among the Yuracares, who abandon and shut up the house of the
dead, regarding it as a profanation to gather a single fruit from the
trees of his field. It is easy to see that with such customs they can
nourish no real ambition since their needs are limited to themselves;
it is one of the causes of their natural indolence and is a motive
which, so long as it exists, will always impede the progress of their
civilization. Why should they trouble themselves about the future
when they have nothing to hope from it? The present is all in all in
their eyes, and their only interest is individual; the son will take no
care of his father’s herd, since it will never come into his possession;
he busies himself only with his own affairs and soon turns his
thoughts to looking after himself and getting a livelihood. This
custom has certainly something to commend it from the moral point
of view in so far as it destroys all the motives for that covetousness
in heirs which is too often to be seen in our cities. The desire or the
hope of a speedy death of their parents cannot exist, since the
parents leave absolutely nothing to their children; but on the other
hand, if the Patagonians had preserved hereditary properties, they
would without doubt have been to-day in possession of numerous
herds, and would necessarily have been more formidable to the
whites, since their power in that case would have been more than
doubled, whereas their present habits will infallibly leave them in a
stationary state, from which nothing but a radical change will be able
to deliver them.”113.1 Thus poverty, indolence, improvidence, political
weakness, and all the hardships of a nomadic life are the miserable
inheritance which the fear of the dead entails on these wretched
Indians. Heavy indeed is the toll which superstition exacts from all
who pass within her gloomy portal.
 But I am not here concerned with the disastrous and deplorable
consequences, the unspeakable follies and crimes
Fear of the ghosts and miseries, which have flowed in practice from
of the slain a check the theory of a future life. My business at present
on murder.
is with the more cheerful side of the subject, with
the wholesome, though groundless, terror which ghosts, apparitions,
and spectres strike into the breasts of hardened ruffians and
desperadoes. So far as such persons reflect at all and regulate their
passions by the dictates of prudence, it seems plain that a fear of
ghostly retribution, of the angry spirit of their victim, must act as a
salutary restraint on their disorderly impulses; it must reinforce the
dread of purely secular punishment and furnish the choleric and
malicious with a fresh motive for pausing before they imbrue their
hands in blood. This is so obvious, and the fear of ghosts is so
notorious, that both might perhaps be taken for granted, especially at
this late hour of the evening. But for the sake of completeness I will
mention a few illustrative facts, taking them almost at random from
distant races in order to indicate the wide diffusion of this particular
superstition. I shall try to shew that while all ghosts are feared, the
ghosts of slain men are especially dreaded by their slayers.
The ancient Greeks believed that the soul of any
Ancient Greek man who had just been killed was angry with his
belief as to the
anger of a ghost at slayer and troubled him; hence even an
his slayer. involuntary homicide had to depart from his
country for a year until the wrath of the dead man
had cooled down; nor might the slayer return until sacrifice had been
offered and ceremonies of purification performed. If his victim
chanced to be a foreigner, the homicide had to shun the country of
the dead man as well as his own.114.1 The legend of the matricide
Orestes, how he roamed from place to place pursued and maddened
by the ghost of his murdered mother, reflects faithfully the ancient
Greek conception of the fate which overtakes the murderer at the
hands of the ghost.114.2
But it is important to observe that not only does
Among the Greeks the hag-ridden homicide go in terror of his victim’s
a manslayer was
dreaded and ghost; he is himself an object of fear and aversion
shunned because to the whole community on account of the angry
he was thought to and dangerous spirit which dogs his steps. It was
be haunted by the
angry and probably more in self-defence than out of
dangerous ghost of consideration for the manslayer that Attic law
his victim. compelled him to quit the country. This comes out
clearly from the provisions of the law. For in the
first place, on going into banishment the homicide had to follow a
prescribed road:114.3 obviously it would have been hazardous to let
him stray about the country with a wrathful ghost at his heels. In the
second place, if another charge was brought against a banished
homicide, he was allowed to return to Attica to plead in his defence,
but he might not set foot on land; he had to speak from a ship, and
even the ship might not cast anchor or put out a gangway. The
judges avoided all contact with the culprit, for they judged the case
sitting or standing on the shore.114.4 Plainly the intention of this rule
was literally to insulate the slayer, lest by touching Attic earth even
indirectly through the anchor or the gangway he should blast it by a
sort of electric shock, as we might say; though doubtless the Greeks
would have said that the blight was wrought by contact with the
ghost, by a sort of effluence of death. For the same reason if such a
man, sailing the sea, happened to be wrecked on the coast of the
country where his crime had been committed, he was allowed to
camp on the shore till a ship came to take him off, but he was
expected to keep his feet in sea-water all the time,115.1 evidently to
neutralise the ghostly infection and prevent it from spreading to the
soil. For the same reason, when the turbulent people of Cynaetha in
Arcadia had perpetrated a peculiarly atrocious massacre and had
sent envoys to Sparta, all the Arcadian states through which the
envoys took their way ordered them out of the country; and after
their departure the Mantineans purified themselves and their
belongings by sacrificing victims and carrying them round the city
and the whole of their land.115.2 So when the Athenians had heard of
a massacre at Argos, they caused purificatory offerings to be carried
round the public assembly.115.3
No doubt the root of all such observances was a
The legend of fear of the dangerous ghost which haunts the
Orestes reflects the
Greek horror of a murderer and against which the whole community
manslayer.
 as well as the homicide himself must be on its
guard. The Greek practice in these respects is clearly mirrored in the
legend of Orestes; for it is said that the people of Troezen would not
receive him in their houses until he had been purified of his guilt,115.4
that is, until he had been rid of his mother’s ghost. The Akikuyu of
British East Africa think that if a man who has killed another comes
and sleeps at a village and eats with a family in their hut, the persons
with whom he has eaten contract a dangerous pollution which might
prove fatal to them were it not removed in time by a medicine-man.
The very skin on which the homicide slept has absorbed the taint
and might infect any one else who slept on it. So a medicine-man is
sent for to purify the hut and its occupants.115.5
Manslayers purged
of the stain of
The Greek mode of purifying a homicide was to kill
human blood by a sucking pig and wash the hands of the guilty
being smeared with man in its blood: until this ceremony had been
the blood of pigs.
performed the manslayer was not allowed to
speak. 116.1 Among the hill-tribes near Rajamahal in Bengal, if two
men quarrel and blood be shed, the one who cut the other is fined a
hog or a fowl, “the blood of which is sprinkled over the wounded
person, to purify him, and to prevent his being possessed by a
devil.”116.2 In this case the blood-sprinkling is avowedly intended to
prevent the man from being haunted by a spirit; only it is not the
aggressor but his victim who is supposed to be in danger and
therefore to stand in need of purification. We have seen that among
these and other savage tribes pig’s blood is sprinkled on persons
and things as a mode of purifying them from the pollution of sexual
crimes.116.3 Among the Cameroon negroes in West Africa accidental
homicide can be expiated by the blood of an animal. The relations of
the slayer and of the slain assemble. An animal is killed, and every
person present is smeared with its blood on his face and breast.
They think that the guilt of manslaughter is thus atoned for, and that
no punishment will overtake the homicide.116.4 In Car Nicobar a man
possessed by devils is cleansed of them by being rubbed all over
with pig’s blood and beaten with leaves. The devils are supposed to
be thus swept off like flies from the man’s body to the leaves, which
are then folded up and tied tightly with a special kind of string. A
professional exorciser administers the beating, and at every stroke
with the leaves he falls down with his face on the floor and calls out
in a squeaky voice, “Here is a devil.” This ceremony is performed by
night; and before daybreak all the packets of leaves containing the
devils are thrown into the sea.117.1 The Greeks similarly used laurel
leaves as well as pig’s blood in purificatory ceremonies.117.2 In all
such cases we may assume that the purification was originally
conceived as physical rather than as moral, as a sort of detergent
which washed, swept, or scraped the ghostly or demoniacal pollution
from the person of the ghost-haunted or demon-possessed man.
The motive for employing blood in these rites of cleansing is not
clear. Perhaps the purgative virtue ascribed to it may have been
based on the notion that the offended spirit accepts the blood as a
substitute for the blood of the man or woman.117.3 However, it is
doubtful whether this explanation could cover all the cases in which
blood is sprinkled as a mode of purification. Certainly it is odd, as the
sage Heraclitus long ago remarked, that blood-stains should be
thought to be removed by blood-stains, as if a man who had been
bespattered with mud should think to cleanse himself by
bespattering himself with more mud.117.4 But the ways of man are
wonderful and sometimes past finding out.
There was a curious story that after Orestes had
The matricide gone mad through murdering his mother he
Orestes is said to
have recovered his recovered his wits by biting off one of his own
wits by biting off fingers; the Furies of his murdered mother, which
one of his own had appeared black to him before, appeared white
fingers.
as soon as he had mutilated himself in this way: it
was as if the taste of his own blood sufficed to avert or disarm the
wrathful ghost.117.5 A hint of the way in which the blood may have
been supposed to produce this result is furnished by the practice of
some savages. The Indians of Guiana believe that
Manslayers an avenger of blood who has slain his man must
commonly taste
their victims’ blood go mad unless he tastes the blood of his victim;
in order not to be the notion apparently is that the ghost drives him
haunted by their crazy, just as the ghost of Clytemnestra did to
ghosts.
Orestes, who was also, be it remembered, an
avenger of blood. In order to avert this consequence the Indian
manslayer resorts on the third night to the grave of his victim, pierces
the corpse with a sharp-pointed stick, and withdrawing it sucks the
blood of the murdered man. After that he goes home with an easy
mind, satisfied that he has done his duty and that he has nothing
more to fear from the ghost.118.1 A similar custom was observed by
the Maoris in battle. When a warrior had slain his foe in combat, he
tasted his blood, believing that this preserved him from the avenging
spirit (atua) of his victim; for they imagined that “the moment a slayer
had tasted the blood of the slain, the dead man became a part of his
being and placed him under the protection of the atua or guardian-
spirit of the deceased.”118.2 Thus in the opinion of these savages, by
swallowing a portion of their victim they made him a part of
themselves and thereby converted him from an enemy into an ally;
they established, in the strictest sense of the words, a blood-
covenant with him. The Aricara Indians also drank the blood of their
slain foes and proclaimed the deed by the mark of a red hand on
their faces.118.3 The motive for this practice may have been, as with
the Maoris, a desire to appropriate and so disarm the ghost of an
enemy. In antiquity some of the Scythians used to drink the blood of
the first foes they killed; and they also tasted the blood of the friends
with whom they made a covenant, for “they take that to be the surest
pledge of good faith.”118.4 The motive of the two
Homicides
supposed to go
customs was probably the same. “To the present
mad unless they day, when a person of another tribe has been slain
taste the blood of by a Nandi, the blood must be carefully washed off
their victim.
the spear or sword into a cup made of grass, and
drunk by the slayer. If this is not done it is thought that the man will
become frenzied.”118.5 So among some tribes of the Lower Niger “it
is customary and necessary for the executioner to lick the blood that
is on the blade”; moreover “the custom of licking the blood off the
blade of a sword by which a man has been killed in war is common
to all these tribes, and the explanation given me by the Ibo, which is
generally accepted, is, that if this was not done, the act of killing
would so affect the strikers as to cause them to run amok among
their own people; because the sight and smell of blood render them
absolutely senseless as well as regardless of all consequences. And
this licking the blood is the only sure remedy, and the only way in
which they can recover themselves.”119.1 So, too, among the Shans
of Burma “it was the curious custom of executioners to taste the
blood of their victims, as they believed if this were not done illness
and death would follow in a short time. In remote times Shan soldiers
always bit the bodies of men killed by them in battle.”119.2 Strange as
it may seem, this truly savage superstition exists apparently in Italy
to this day. There is a widespread opinion in Calabria that if a
murderer is to escape he must suck his victim’s blood from the
reeking blade of the dagger with which he did the deed.119.3 We can
now perhaps understand why the matricide Orestes was thought to
have recovered his wandering wits as soon as he had bitten off one
of his fingers. By tasting his own blood, which was also that of his
victim, since she was his mother, he might be supposed to form a
blood-covenant with the ghost and so to convert it from a foe into a
friend. The Kabyles of North Africa think that if a
Various precautions murderer leaps seven times over his victim’s grave
taken by
manslayers against within three or seven days of the murder, he will
the ghosts of their be quite safe. Hence the fresh grave of a
victims.
murdered man is carefully guarded.119.4 The
Lushai of North-Eastern India believe that if a man kills an enemy the
ghost of his victim will haunt him and he will go mad, unless he
performs a certain ceremony which will make him master of the dead
man’s soul in the other world. The ceremony includes the sacrifice of
an animal, whether a pig, a goat, or a mithan.120.1 Among the
Awemba of Northern Rhodesia, “according to a superstition common
among Central African tribes, unless the slayers were purified from
blood-guiltiness they would become mad. On the night of return no
warrior might sleep in his own hut, but lay in the open nsaka in the
village. The next day, after bathing in the stream and being anointed
with lustral medicine by the doctor, he could return to his own hearth,
and resume intercourse with his wife.”120.2 In all such cases the
madness of the slayer is probably attributed to the ghost of the slain,
which has taken possession of him.
 That the Greek practice of secluding and
The custom of purifying a homicide was essentially an exorcism,
secluding and
purifying homicidesin other words, that its aim was to ban the
is intended to dangerous ghost of his victim, is rendered
protect them practically certain by the similar rites of seclusion
against the angry
and purification which among many savage tribes
spirits of the slain,
which are thought have to be observed by victorious warriors with the
to madden their
slayers.
avowed intention of securing them against the
spirits of the men whom they have slain in battle.
These rites I have illustrated elsewhere,120.3 but a few cases may be
quoted here by way of example. Thus among the Basutos “ablution
is especially performed on return from battle. It is absolutely
necessary that the warriors should rid themselves, as soon as
possible, of the blood they have shed, or the shades of their victims
would pursue them incessantly, and disturb their slumbers. They go
in a procession, and in full armour, to the nearest stream. At the
moment they enter the water a diviner, placed higher up, throws
some purifying substances into the current.”120.4 According to
another account of the Basuto custom, “warriors who have killed an
enemy are purified. The chief has to wash them, sacrificing an ox in
the presence of the whole army. They are also anointed with the gall
of the animal, which prevents the ghost of the enemy from pursuing
them any farther.”121.1 Among the Thonga, a Bantu tribe of South
Africa, about Delagoa Bay, “to have killed an enemy on the battle-
field entails an immense glory for the slayers; but that glory is fraught
with great danger. They have killed.… So they are exposed to the
mysterious and deadly influence of the nuru and must consequently
undergo a medical treatment. What is the nuru? Nuru, the spirit of
the slain which tries to take its revenge on the slayer. It haunts him
and may drive him into insanity: his eyes swell, protrude and become
inflamed. He will lose his head, be attacked by giddiness
(ndzululwan) and the thirst for blood may lead him to fall upon
members of his own family and to stab them with his assagay. To
prevent such misfortunes, a special medication is required: the
slayers must lurulula tiyimpì ta bu, take away the nuru of their
sanguinary expedition.… In what consists this treatment? The
slayers must remain for some days at the capital. They are taboo.
They put on old clothes, eat with special spoons, because their
hands are ‘hot,’ and off special plates (mireko) and broken pots.
They are forbidden to drink water. Their food must be cold. The chief
kills oxen for them; but if the meat were hot it would make them swell
internally ‘because they are hot themselves, they are defiled (ba na
nsila).’ If they eat hot food, the defilement would enter into them.
‘They are black (ntima). This black must be removed.’ During all this
time sexual relations are absolutely forbidden to them. They must
not go home, to their wives. In former times the Ba-Ronga used to
tattoo them with special marks from one eyebrow to the other.
Dreadful medicines were inoculated in the incisions, and there
remained pimples ‘which gave them the appearance of a buffalo
when it frowns.’ After some days a medicine-man comes to purify
them, ‘to remove their black.’ There seem to be various means of
doing it, according to Mankhelu. Seeds of all kinds are put into a
broken pot and roasted, together with drugs and psanyi122.1 of a
goat. The slayers inhale the smoke which emanates from the pot.
They put their hands into the mixture and rub their limbs with it,
especially the joints.… Insanity threatening those who shed blood
might begin early. So, already on the battle-field, just after their deed,
warriors are given a preventive dose of the medicine by those who
have killed on previous occasions.… The period of seclusion having
been concluded by the final purification, all the implements used by
the slayers during these days, and their old garments, are tied
together and hung by a string to a tree, at some distance from the
capital, where they are left to rot.”122.2
The accounts of the madness which is apt to
With some savages befall slayers seem too numerous and too
temporary insanity
seems to be really consistent to be dismissed as pure fictions of the
caused by the sight savage imagination. However we may reject the
or even thought of native explanation of such fits of frenzy, the
blood.
reports point to a real berserker fury or unbridled
thirst for blood which comes over savages when they are excited by
combat, and which may prove dangerous to friends as well as to
foes. The question is one on which students of mental disease might
perhaps throw light. Meantime it deserves to be noticed that even
the people who have staid at home and have taken no share in the
bloody work are liable to fall into a state of frenzy when they hear the
war-whoops which proclaim the approach of the victorious warriors
with their ghastly trophies. Thus we are told that among the Bare’e-
speaking Toradjas of Central Celebes, when these notes of triumph
were heard in the distance the whole population of the village would
turn out to meet and welcome the returning braves. At the mere
sound some of those who had remained at home, especially women,
would be seized with a frenzy, and rushing forth would bite the
severed heads of the slain foes, and they were not to be brought to
their senses till they had drunk palm wine or water out of the skulls. If
the warriors returned empty-handed, these furies would fall upon
them and bite their arms. There was a regular expression for this
state of temporary insanity excited by the sight or even the thought
of human blood; it was called merata lamoanja or merata raoa, “the
spirit is come over them,” by which was probably meant that the
madness was caused by the ghosts of the slaughtered foes. When
any of the warriors themselves suffered from this paroxysm of frenzy,
they were healed by eating a piece of the brains or licking the blood
of the slain.123.1
Among the Bantu tribes of Kavirondo, in British
Means taken by East Africa, when a man has killed an enemy in
manslayers in
Africa to rid warfare he shaves his head on his return home,
themselves of the and his friends rub a medicine, which generally
ghosts of their consists of cow’s dung, over his body to prevent
victims.
the spirit of the slain man from troubling him.123.2
Here cow’s dung serves these negroes as a detergent of the ghost,
just as pig’s blood served the ancient Greeks. Among the Wawanga,
about Mount Elgon in British East Africa, “a man returning from a
raid, on which he has killed one of the enemy, may not enter his hut
until he has taken cow-dung and rubbed it on the cheeks of the
women and children of the village and purified himself by the
sacrifice of a goat, a strip of skin from the forehead of which he
wears round the right wrist during the four following nights.”123.3 With
the Ja-Luo of Kavirondo the custom is somewhat different. Three
days after his return from the fight the warrior shaves his head. But
before he may enter his village he has to hang a live fowl, head
uppermost, round his neck; then the bird is decapitated and its head
left hanging round his neck. Soon after his return a feast is made for
the slain man, in order that his ghost may not haunt his slayer.123.4 In
some of these cases the slayer shaves his head, precisely as the
matricide Orestes is said to have shorn his hair when he came to his
senses.123.5 From this Greek tradition we may infer with some
probability that the hair of Greek homicides, like that of these African
warriors, was regularly cropped as one way of ridding them of the
ghostly infection. Among the Ba-Yaka, a Bantu people of the Congo
Free State, “a man who has been killed in battle is supposed to send
his soul to avenge his death on the person of the man who killed
him; the latter, however, can escape the vengeance of the dead by
wearing the red tail-feathers of the parrot in his hair, and painting his
forehead red.”124.1 Perhaps, as I have suggested elsewhere, this
costume is intended to disguise the slayer from his victim’s
ghost.124.2 Among the Natchez Indians of North
Precautions taken
by the Natchez
America young braves who had taken their first
Indians. scalps were obliged to observe certain rules of
abstinence for six months. They might not sleep
with their wives nor eat flesh; their only food was fish and hasty-
pudding. If they broke these rules they believed that the soul of the
man they had killed would work their death by magic.124.3
The Kai of German New Guinea stand in great
Ghosts of the slain fear of the ghosts of the men whom they have
dreaded by the Kai
of German New slain in war. On their way back from the field of
Guinea. battle or the scene of massacre they hurry in order
to be safe at home or in the shelter of a friendly
village before nightfall; for all night long the spirits of the dead are
believed to dog the footsteps of their slayers, in the hope of coming
up with them and recovering the lost portions of their souls which
adhere with the clots of their blood to the spears and clubs that dealt
them the death-blow. Only so can these poor restless ghosts find
rest and peace. Hence the slayers are careful not to bring back the
blood-stained weapons with them into the village; for that would be
the first place where the ghosts would look for them. They hide them,
therefore, in the forest at a safe distance from the village, where the
ghosts can never find them; and when the spirits are weary of the