Long term assets
Illiquids
The Financial Conduct Authority’s (FCA) policy statement on investing in long-term assets (yes, property, but also a range of other illiquid assets) has been released (read it here). This is in response to Consultation Paper CP21/12, which is available here, for context and background. It comes at a time when investors response to the suspension (and subsequent re-opening) of open-ended property funds has been uncompromising, often resulting in significant outflows, some mergers and a few closures.
So, is the ‘Long Term Asset Fund’, to give it its full name, a newly created category of authorised open-ended funds designed to invest in illiquid investments, going to cut the mustard? Investment Week’s summary of its characteristics can be found here, and initial industry feedback running the gamut of opinions can be found here.
And finally, if you’re wondering if listed investment trusts could be a “tried and tested” solution, then Richard Stone, the newly minted CEO of the Association of Investment Companies wants you to know exactly what his membership thinks of this policy statement. His views are here.
ESG/Responsible Investing
Tackling greenwashing
Initially announced in July, Chancellor Rishi Sunak last week published a roadmap setting out the Treasury’s new Sustainability Disclosure Requirements (SDR). The full report is here. Aimed at tackling greenwashing, it has been broadly well received, with Investment Week’s reportage here, and will likely have considerable impact on financial services and asset managers specifically.
Rubbish in, rubbish out
One of the SDR’s key aims is to address the issue of ESG ratings. This is a growing problem for investors of all stripes, as the Financial Times covers comprehensively here, with the issue well summarised by one commentator: ”When you peel back the layers, a lot of third party agencies measuring for ESG are compiling metrics that reward fundamentally unsustainable companies.” Quite!
FBC corporate members who haven’t yet signed up to join senior adviser Brandon Horwitz and his panel of experts from St James’s Place, HSBC and Liontrust to discuss what fund managers can and should be doing about Responsible Investing, can do so here. The 60-min digital meeting is on 16 November and starts at 2pm GMT.
New SFDR product categories
Meanwhile, if you have just gotten to grips with the differences between Articles 6, 8 and 9 of the European Securities and Market Authority’s Sustainable Finance Disclosure Regulation (SFDR), then think again. Ignites Europe reports that the EU markets watchdog says two new SFDR product categories should be created for funds that have an “environmental objective”, to be aligned with the taxonomy. Read all about it here.
Board support
And finally, the Financial Times reports that Morningstar has calculated the average level of shareholder support for environmental and social petitions increased to a record 34% in the 12 months to July 2021 (read full report here). Diversity and equity inclusion resolutions won an average of 43% backing, and nine petitions passed. The full FT report is here.
Distribution governance
Platform MPS fees lowered
It is pure coincidence surely, but weeks after the FCA’s ‘Dear CEO’ letter to wealth managers and stockbrokers (read it here), Tilney Smith & Williamson says the fees on its model portfolios have reduced by an average of 18.4% over the past 12 months, and as much as a 26.7% in the case of one of its strategies. Read Portfolio Adviser’s coverage here.
It should be noted that lower cost model portfolios are very much of the day. Both Legal & General Investment Management and Schroders, to name a couple of FBC’s corporate members, have recently launched model portfolios with all-in fees ranging from 0.32% to 1%.
You must be KIDding me…
Sighs of relief have been heard echoing across Europe with the deferral to 31 Dec 2022 of the deadline for Ucits funds to replace key investor information (KIID) documents with a Priips key information document (KID). Reasons include delays to publication of relevant technical requirements and concerns raised by asset managers about time required to digest and implement these. Read more about it here.
Investment trusts
First all-female board
The number of women directors on investment trusts has risen to 34.5%, up from 8% in 2010, according to Investec, with news this week that an all-female board of three are looking to raise assets for a solar-powered investment trust. Investment Week has the report here.
Hybrid board meetings
Adapting for good governance
In this opinion piece in the Financial Times, the issue of having to run board meetings virtually is laid bare and explores the impact it is having on chairs’ skills, and board governance more generally. “Anybody who says virtual is more efficient for a meeting is believing their own baloney,” is how one US CEO sums it up rather directly. Read the excellent article here.
Speaking of board efficiency…the performance and efficacy of fund boards’ activities – whether digital or in person – is at the heart of FBC’s brand new Board Effectiveness series, which kicks off with an inaugural session today examining the key characteristics of high-performing boards and the warning signs board chairs and their colleagues should not ignore. Find out more about FBC’s Board Effectiveness programme here. FBC corporate members who aren’t able to catch the live event can watch a recording of the session shortly or listen to the podcast by logging into their Member Portal.
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