Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Investors question managers’ engagement with companies
(pictured: Brett Jollie)
Investors believe it is “essential” that their asset managers engage with the companies in which they invest, but a significant proportion believe they are not very effective at it. A study commissioned by Aberdeen Asset Management globally provides strong support for the understanding that governance impacts on investment returns.
The survey of 293 investment decision-makers from around the world examined perceptions on governance issues, including the challenges facing countries and companies, and the opportunities presented by good governance and stewardship. It also considered the importance and difficulties of long-term investing.
The study found that investors think asset managers should engage with investee companies on a range of topics, notably: corporate governance (cited by 92 per cent of respondents); board diversity; structure and succession planning (83 per cent), and corporate actions/takeovers (76 per cent).
They also think regular engagement by asset managers with the companies in which they invest is essential, not only for monitoring those companies’ governance standards, but in order for the asset managers themselves to demonstrate best practice.
However, the study found, there is no consensus on the extent to which these managers are effective in engaging with investee companies: 43 per cent of respondents said their asset managers are effective in this respect; 37 per cent disagreed.
Asked about the barriers to putting long-term investing into practice, 70 per cent of respondents cited a short-term, peer-sensitive environment, while 48 per cent agreed that regulation forces short-term thinking and acting.
As strategic investment opportunities become more difficult to quantify, there has been a movement globally towards governance as a point of differentiation. The research found widespread belief (among 89 per cent of respondents) that good governance helps drive investment performance.
Commenting on the research, Brett Jollie, head of Aberdeen Asset Management in Australia, said:Â “Attitudes to governance are changing. Until recently the focus was mainly on voting, and often passive. Investors are now prepared to go further and build relationships with boards.
“As this research shows, such engagement can help returns over the long term. So it’s entirely natural for clients to query fund managers over their approach and effectiveness. For Aberdeen, research such as this helps us advocate a wider understanding of the importance of governance.”
The research was conducted independently by Gabriel Research & Management Ltd. It surveyed institutional investors, trustees, managers and consultants across the financial services industry, corporate and not-for-profit sectors, with participants from the UK, Europe, North America, Canada and Asia Pacific.
