Fund managers must try harder on ESG
The FCA was, once again, the spur behind this week’s biggest story. The watchdog issued an open letter to authorised fund managers calling for a better standard of ESG fund applications, citing shortcomings in proposals that risked undermining consumer confidence in the sector.
As reported in Portfolio Adviser, FCA head of asset management supervision Nick Miller said the regulator had seen a high volume of applications for funds with an ESG focus and a number of existing funds amending objectives, in line with the boom in demand for sustainable investing strategies. However, he said that the quality of applications was generally poor.
As such, the FCA has instigated a series of guiding principles to aid asset managers when making fund applications. “We will continue to scrutinise and challenge firms on their fund strategies and disclosures and to ensure that documentation submitted to us for authorisation meets our regulatory requirements,” the FCA said.
The regulator also published its business plan for the upcoming year, promising to be “more innovative, more adaptive and more assertive”. The most interesting reading can be found nestled deep within the neon-styled document, where the watchdog says it plans to identify “outliers”.
On page 36, the FCA states: “We will continue to seek to identify funds that are outliers to their peers – for example, due to high fees – to understand why, and work with Authorised Fund Managers and Depositaries to take corrective action where necessary.”
Investment Week’s coverage of the business plan highlights new disclosure rules in line with TCFD guidance for asset managers, life insurers and FCA-regulated pension schemes. Industry experts have, however, expressed their concern surrounding the lack of a specific timeline for when the FCA will begin consultation on the UK’s version of the EU’s Sustainable Finance Disclosure Regulation.
ACD consolidation on the cards?
Last month, Portfolio Adviser reported on the FCA’s review of host or third-party authorised corporate directors (ACDs), which found that some were operating in the asset management market with inadequate standards in place.
On the back of this, Ignites Europe reports that the sector could face consolidation. One expert, who declined to be named in the article, said: “Given the rigour that [the FCA] is asking for, I should not be surprised if some [host] providers drop away [or] get taken over.”
There are currently 15 host ACDs operating in the UK, the article stated, with more than £100bn in assets between them. Some of these would need to be better resourced than they are currently, one interviewee told Ignites, potentially paving the way for consolidation.
SJP, M&G target improvements after AoV reports
St James’s Place Wealth Management has placed two funds on its watchlist following its latest value assessment, Investment Week reports. The Alternative Assets fund has not achieved its capital growth objective, and the group is to “re-focus” the strategies used by the manager. Likewise, the Japan fund has also underperformed its benchmark and peer group. An additional manager has been added to the fund as a result.
Elsewhere, M&G’s fund board was critical of the performance of many of its funds in its latest Assessment of Value report. Improvements were noted in relation to the company’s first AoV report, as Investment Week details, but substandard returns meant two-thirds of its fund range by assets were subject to a ‘must improve’ instruction from the board.
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