Proxy advisory firm Egan-Jones has recommended that shareholders of the XAI fund vote against a proposed change of sub-adviser, raising questions about the fund’s governance and future performance. The recommendation, issued on 22 July 2026, comes ahead of a shareholder meeting scheduled for next month, where investors will decide on the switch.
The XAI fund, which focuses on artificial intelligence and technology equities, has faced scrutiny over its management structure. Egan-Jones argued in its report that the proposed change lacks sufficient justification and could introduce additional risk without clear benefits for investors. The firm also highlighted concerns about the track record of the proposed sub-adviser, though it did not name the entity.
For UK investors, the outcome of this vote carries particular weight. The XAI fund is held by several UK pension schemes and institutional portfolios, given its exposure to the rapidly growing AI sector. A change in sub-adviser could alter the fund’s investment strategy, risk profile, and fee structure, potentially affecting returns for UK savers.
The FTSE 100 edged up 0.3% to 8,245 points on 23 July, with technology stocks broadly higher amid optimism about AI demand. However, the XAI fund’s shares have underperformed the broader tech sector over the past six months, falling 4.2% compared with a 2.1% gain for the FTSE All-Share Technology Index. Analysts at Peel Hunt noted that governance issues can weigh on investor sentiment, particularly for thematic funds where management stability is crucial.
“Egan-Jones’s recommendation is a red flag for investors who rely on the fund’s existing strategy,” said a senior analyst at a London-based wealth manager, speaking on condition of anonymity. “If shareholders vote against the change, it could restore confidence. If not, we may see further outflows.”
The XAI fund’s board has defended the proposed switch, arguing it would bring in fresh expertise and lower costs. However, Egan-Jones’s intervention is likely to sway undecided investors, given its influence among institutional shareholders. A final decision is expected by early August.