UK authorised fund managers now have just 10 months to resolve the vexatious issue of the Asset Management Market Study’s Assessment of Value, and the other small matter of getting their fund board properly fit for purpose.
When UK Fund Boards (UKFB) ran its inaugural Senior Managers Roundtable in Oct, I recall thinking that the bulk of the 55-odd people who came for the meeting came in with a degree of curiosity and left in a state to shock! Now, I am exaggerating, but only ever so slightly.
I think it would be fair to say that the vast majority of the UK fund industry still hasn’t quite gotten to grips with the enormity of the task ahead of them in creating and then presenting a relevant and useable measure of Assessment of Value – one that is robust enough for their internal use and that of their boards, but one that is sufficiently easy for their end-investors to make sense of. Yes, not easy.
At UKFB we’d like to think that we are starting to get the industry’s attention on this issue – but I also know we are playing the long game here, well, 10 months’ worth of it. At lunch a couple of weeks ago with the head of governance of a global multinational asset manager with a sizeable UK business, I asked if they “were ready” with their AoV measurement metric(s). All he did was raise his eyebrows, and shake his head. “Not a chance,” were the words he didn’t say.
Happily some help is at hand. Last week, both the Investment Association and the CFA Society of the UK presented their thinking on the issue of Assessment of Value/Value for Money to their memberships, and later this week UK Fund Boards will be discussing the topic in some detail.
What does feel like a bit of a racing certainty is the AoV issue is going to go to the 30th of Sep 2019 wire, and then some. As one UK CEO said to me, “by next Sep we’ll have done well to have the first iteration of the AoV measurement”. “It will be the start,’’ he said, adding, “not the end of the process, and everyone is just going to have to get with it.”
UKFB iNED “boot camp”
Having started the AoV discussion at our October meeting (admittedly, with no resolution in sight), UK Fund Boards is now turning its attention to the other big elephant in the room: the refurbishment of fund boards. To very quickly recap: some 190 UK managers will need a formal board structure in place by 30 Sep next year. This involves appointing a chair (doesn’t have to be independent, but is liable under the Senior Managers Regime & Certification), and appointing a minimum of two independent directors. For heftier boards, the independents have to account for a quarter of the board gang.
So, lots of jobs to go around, I hear you thinking, even if not saying, hoping others haven’t realised! Well, the Financial Conduct Authority (FCA) rather helpfully estimated that this initiative will generate some 480 directorships – but I don’t recall them saying 480 new directorships, and my sense is, based on several recent conversations, the number of new roles will come in well under that number.
First, many of better-resourced managers already have a handful of independent directors on their boards. There are several reasons for this, including (perish the thought) good governance before it was foisted upon them, if one can say that without sounding too smug on their behalf!
Second, several of the larger, global multinational fund managers with fund boards in multiple jurisdictions outside of the UK – Ireland and Luxembourg and even the US – are using the UK regulatory rejig as an opportunity to take stock and rationalise their various board structures. The thinking is, and I have heard this on more than one occasion, to use one or more of their independent directors from elsewhere on their UK fund boards. Perfectly pukkah, though one governance guru rather quickly said that it would behove the spirit, at a minimum, of the FCA’s efforts to see at least one independent director be locally recruited. Phew!
By the way, all things UK fund boards related will be exhaustively discussed at our half-day iNED “boot camp”. It is on the 24th of January and very kindly hosted by Aberdeen Standard Investments at their London offices, for which we will be a sending out details shortly – so keep an eye out, if this is your thing. Needless to say, we’ve got some seriously top-drawer talent lined up for the event.
And finally, if you’re reading this on the UKFB website, you’ll notice we’ve rather spruced it up, more useable, more readable and a bit more like a website should look like! Catherine Battershill has single-handledly spearheaded the changes (with some help!), and if you like it – or have some other ideas for us, please do let us know.
That’s all from me, for now, and hope to see some of you on the 24th of January.