Climate disclosures: Is safe arrival assured?
As the industry continues to grapple with the best way of approaching climate-related disclosures, the FCA closed its CP21/17 consultation which seeks to introduce climate-related financial disclosure rules and guidance for asset managers, life insurers, and FCA-regulated pension providers. The proposals are aligned with the recommendations of the Taskforce on Climate-related Financial Disclosures (TCFD).
In its response to the consultation, and as reported in Investment Week (subscription required), the Investment Association warned of misleading disclosures, mis-pricing of assets and the mis-allocation of capital if the regulator’s proposals were not amended. It also expressed concern about the lack of data available for some assets such as derivatives and currency instruments.
Elsewhere, the Financial Times (subscription required) reports that several of the world’s biggest asset managers failed to make it onto the Financial Reporting Council’s (FRC) stewardship code list of signatories. The code recently underwent a revamp and now imposes tougher reporting requirements on investors.
Helen Thomas of the FT tries to decipher what it all means here.
And the FRC’s list of successful firms can be found here.
US fund board directors: In the money
Analysis by BoardIQ (subscription required) reveals that more fund directors in the US saw their pay increase last year than in 2019, with raises at boards overseeing ETFs and smaller funds outpacing those at the largest funds. Average pay increased 4.3% last year to $179,997, compared with a 3.7% average increase in 2019. However, pay for independent chairs rose the slowest. This infographic, also by BoardIQ, provides more detail.
At Fund Boards Council, we’ve conducted our own annual compensation review for UK iNEDs as part of our 2021 iNED Survey. Contact us for more information on this survey and its findings.
Absolute Return Funds: Are things looking up?
According to two arbdn investment experts, the outflows of more than £20bn over the course of four years from the firm’s flagship Global Absolute Return Strategies fund, can be laid squarely at the feet of poor performance. David Bint (multi-asset investment specialist) and Gerry Fowler (absolute return investment director) share their reflections with Investment Week.
Elsewhere, Jupiter has announced that its beleaguered absolute return fund will be overhauled. The fund shed most of its assets in 2020 and is now sitting on losses of 22.5% over three years. But Ryan Hughes, AJ Bell head of active portfolios, finds the refresh hard to square: “The bolder step would have been to close the fund and give remaining investors their money back.”
Morningstar (subscription required) has crunched the numbers and presents the absolute return fund winners and losers following the 2020 crash.
Fund performance is one of the FCA’s seven key criteria for judging assessment of value.
Everybody say AI
The CFA Institute has warned that most investment managers are underestimating the organisational changes needed to integrate artificial intelligence (AI) successfully, reports Ignites Europe (subscription required). Advances in technology have expanded fund management firms’ ability to take deep dives into valuable data analytics and reporting. This has opened up huge opportunities for client servicing, among other things, and the implications for board governance are important too. The full CFA Institute report is available to read here.
To gain a better understanding of how new technologies can be harnessed by industry players, this guide by FT Adviser is a good place to start.
Separately, the International Organisation of Securities Commissions (Iosco) has published guidance that reflects expected standards of conduct by market intermediaries and asset managers using artificial intelligence and machine learning.
State Street/BBH deal: A boon for clients?
State Street has announced that it is buying the investor services businesses of Brown Brothers Harriman (BBH). The $3.5 billion cash deal will see BBH continue to independently own and operate its separate Private Banking and Investment Management businesses.
The addition of BBH Investor Services will further State Street’s strategic goal of expanding and deepening its presence in key non-US markets. The deal bolsters its market share in the EMEA region from 24 to 33 per cent.
According to Ignites Europe, industry expert Chris Edge says there is “no chance of higher fees” for asset management clients because of the resulting economies of scale and intense competition from rivals.
The Asset explores some of the industry consolidation that’s been taking place within asset servicing. This trend may help the downward pressure on fees to continue, with asset management firms feeling able to negotiate more boldly in their favour.
New! Recent fund board appointments
First Sentier Investors has hired Standard Life funds veteran Jacqueline Lowe in a new non-executive position on the board of its UK division. First Sentier, formerly First State, said Lowe would provide strategic guidance for its local plans, in addition to boosting independent oversight and governance.
Margaret O’Connor has joined Chrysalis investment trust as a non-executive director as the firm seeks to diversify the composition, skills and perspective of its board. O‘Connor is an American and Irish citizen with a 30-year career in Asian and African fintech, MarketingTech, e-commerce, and SaaS businesses as an investor, advisor, entrepreneur, corporate executive, and non-executive director.
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