Brexit and the future of asset management
It has been five years since the UK’s historic vote to leave the European Union. With the drawn-out exit negotiations now (largely) behind us, Portfolio Adviser asked four investment professionals from Legal & General Investment Management, Gibbs Denley Investment Management, JPMorgan Asset Management, and Federated Hermes for their views on asset management post-Brexit.
One of the final bridges between the pre- and post-Brexit worlds for asset managers has been the Financial Conduct Authority’s temporary permissions regime for financial companies in the EU selling into the UK. According to Ignites Europe (subscription required), EU firms can expect a rigorous review from the UK watchdog when the regime ends in 2023. FCA boss Nikhil Rathi said “all firms can expect to be held to the same high standards” regardless of domicile.
On the subject of sector outlooks, credit rating agency Moody’s and consultancy EY both released reports on asset management in the past fortnight. Moody’s removed its ‘negative’ outlook for the sector from its most recent report, according to Institutional Investor, following the strong post-pandemic market rebound. The agency’s full report is available to registered users here.
For its part, EY took a longer-term view and warned that asset managers could face a steady decline in profits if they fail to meet the significant challenges of regulation and passive investing.
Fund managers ring the changes
Aviva Investors was reported to have made 10 portfolio managers redundant as part of a strategic shift to refocus on sustainable investment offerings. Portfolio Adviser covered the news, while Financial Times business columnist Helen Thomas described the exits as a further signal of the end of the so-called ‘star manager’ culture.
Speaking of star managers, at Invesco fixed income bosses Paul Causer and Paul Read have announced their retirement at the end of this year. Investment Week reports on the reaction to the news and the company’s plans for leadership transition and expansion of the fixed income team.
Meanwhile, Aegon Asset Management has become the latest asset manager to wind up its beleaguered property fund. Despite raising its cash level to more than 30% of its overall portfolio, it has remained a forced seller in a difficult market since gating more than a year ago. Investment Week has the story and industry reaction.
Counting the pennies
Canada Life Asset Management has cut fees on some of its bond funds following its Assessment of Value (AoV) report, according to Portfolio Adviser. The AoV report, conducted by the fund board at its ACD Link, is available here and will soon be added to FBC’s AoV Report Bank.
Baillie Gifford has also reduced the management fee on one of its funds. As Investment Week reports, the group’s £2bn Diversified Growth fund’s fee has been cut to coincide with the product reopening to new investments after eight years.
Many funds based in Ireland and Luxembourg have been adjusting their performance fees in the wake of recent guidance from the European Securities and Markets Authority. The regulator set out that funds should crystallise performance fees no more frequently than annually, and must have a five-year high watermark or a clawback structure in place, reports Ignites Europe (subscription required).
Citing the same report, from advisory firm Fitz Partners, Investment Week took the angle that performance fees across Europe lacked harmony, making them difficult for investors to compare. Fitz analysed more than 1,200 performance fee structures.
Who watches the raters?
There has been an explosion in the number of companies purporting to offer ESG ratings services for companies and funds in recent years. This proliferation has also meant a large number of different standards, with some methodologies being less than clear.
In an effort to achieve some sort of alignment, Reuters reports that the International Organization of Securities Commissions is working with the IFRS Foundation to construct a regulatory regime for ratings providers.
A separate Reuters story details how France aims to become a leader on climate change regulation, proposing new rules for 230 fund management companies that raise the bar for environmental reporting standards.
In the UK, the FCA is also raising the bar, proposing to bring asset managers into the scope of its climate change reporting rules. The rules – based on the recommendations of the Task Force on Climate-related Financial Disclosures – already apply to premium listed companies in the UK, and the regulator wants them to apply to all listed companies and the asset managers, life insurers and pension providers it regulates.
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