Some of the leading figures in the institutional investment sector in the UK are concerned that the investor forum proposed by the Kay Review and backed by the government will be an irrelevant “talking shop”.
Robert Talbut, the chief investment officer at Royal London Asset Management who chairs the influential Investment Committee at the Association of British Insurers, said he believes in collaboration but not an investor forum.
He didn’t believe another investor body was “somehow a silver bullet” for shareholders to “right all the wrongs in the world”. He worried the forum would not be made up of people genuinely doing engagement. “Therefore we will build ourselves up to disappointments about what it might achieve,” he said at a conference on corporate governance organised by the National Association of Pension Funds (NAPF).
The comments put the ABI at odds with the fund management trade body the Investment Management Association, which has already invited “all institutional investors and shareholders” to discuss setting up a forum. The NAPF has also come out in favour of the idea.
The investor forum was one of the main proposals to emerge from the government-backed Kay report into equity market short-termism.
The IMA sees it as a vehicle through which institutional investors can seek to identify broader support for change at companies and co-ordinate action by a “critical mass of shareholders”, including overseas and sovereign wealth investors. It plans to work with all interested parties over the next few months to refine the proposition.
Speaking earlier at the conference, Business Secretary Vince Cable envisaged the forum as “all the people in the investment chain around a table”. He was happy to be a catalyst but stressed it was not the government’s role to set up a new ‘quango’, or non-departmental public body.“A forum will only succeed if it is created and run by the investors it represents,” Cable said.
The IMA, NAPF and ABI already comprise the existing Institutional Investor Committee (formerly the Institutional Shareholders Committee). The NAPF also has its own Shareholder Affairs Committee.
“There’s a slight risk of – when in doubt, set up a committee,” said Rob Lake, Director of Responsible Investment at the UN Principles for Responsible Investment. Lake, who joined the PRI from Dutch asset management giant APG, is a former Head of Corporate Engagement at Henderson Global Investors.
Anita Skipper, Corporate Governance Advisor at Aviva Investors, said the new forum could be useful for international investors and smaller fund managers who don’t necessarily have access to corporate managers.
However, most who spoke at the meeting were sceptical about the new forum. One senior governance and sustainability figure called it a “complete distraction, let’s not re-invent the wheel”.
Governance for Owners, the activist investment firm, while welcoming the planned forum, said in a release that for its to be credible and effective, it must coordinate its activities with existing investor bodies to avoid duplication and confusion.
Amidst the debate about the Kay response, the NAPF quietly released its new Stewardship Policy, which includes a section on asset owners’ contracts with fund managers.
“Mandates,” the new guidance states, “should encourage integration of corporate governance and other material non-financial risks into investment decision-making; align interests through fees and pay structure; ensure adherence to high standards of stewardship and provide for useful and transparent reporting to the fund.”