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Asset owners, fund managers to sit on UK’s new Kay Review panel

Government confirms role of asset owners in major systemic review

Asset owner representatives will sit on the new government-backed panel headed by economics professor John Kay that will look into the systemic problems of the investment chain.
The review was launched last week by Business Secretary Vince Cable to examine investment in UK equity markets and its impact on the long-term performance and governance of UK quoted companies.
Cable said Kay, who’s a visiting Professor of Economics at the London School of Economics and a columnist for the Financial Times, would head an expert panel to look at behaviour right along the investment chain – from company boards, through pension funds, advisers and fund managers, to ultimate beneficiaries.
Although details of the composition of the panel are sketchy, it has emerged that asset owners will be involved from the outset.
“I can confirm at this stage that the expert panel working with John Kay will include corporate (quoted company), fund manager and asset owner representatives,” a spokesperson for Cable told Responsible Investor.
“We are looking to make appointments as soon as possible so John Kay can begin his review.” The review is expected to report in the first half of 2012.

Cable launched the review in a speech at the Association of British Insurers saying: “Equity investment needs to be recalibrated to support the long-term interests of companies and underlying beneficiaries such as pension fund members.”

The initiative has been welcomed by investor groups like the National Association of Pension Funds and the Investment Management Association.
“Pension funds are encouraged by the review’s ambition to improve transparency and shareholder engagement,” said NAPF Chief Executive Joanne Segars – while the IMA called on the panel to include “significant representation” from asset owners and managers.
Catherine Howarth, CEO at campaign group FairPensions, said the review was “hugely positive news”.
But business lobby group the Institute of Directors was more sceptical. IoD Director General Miles Templeman said there was “no doubt” that investors could do more to engage with investee companies, but said the issue has already been considered in previous reviews.
“It is not clear what a further review of these issues will uncover,” he said. “What is needed right now is a period of stability in corporate policy making, not further uncertainty”.

Meanwhile, Cable’s department plans to launch a consultation in the near future looking at changing company reporting to improve the disclosure of executive pay and its link to company performance.