Law Debenture, the leading provider of trusteeship services to UK pension funds, has withdrawn from the Stewardship Code of the UK Financial Reporting Council (FRC), in part because its external fund manager for its investment trust arm is already a signatory.
The London-listed firm, which traces its origins to 1889, is split into two businesses. It is a listed investment trust whose £896m (€992m) of assets are managed by Janus Henderson. Its fiduciary services arm encompasses pension trusteeship, escrow, process agent, corporate trust etc. In this capacity it is the largest provider of independent pension trustees in the UK; client schemes have over 2m members with over £150bn in assets.
Ian Bowden, Governance Services Director at Law Debenture, told RI that there are not very many investment trusts listed as signatories in the code.
“We were unusual in still being listed and decided it was actually not something which was a benefit to us.”
Rival trusteeship firm BESTrustees is also not a signatory.
The FRC, the UK accounting regulator as well as actuarial and governance watchdog, announced today it is dismantling the third tier of the Code, of which Law Debenture was a signatory, because temporarily there is no one to be included.
In November 2016 the FRC categorised asset managers (of those 200 that have officially committed to the code) in three tiers, with those in the third tier having to make substantial improvement in order to climb to the second tier.
If asset managers didn’t show improvement against the seven principles of the Stewardship Code in six months, their names would be removed from the list.
That proviso didn’t apply to asset owners, which were categorised in two tiers only.Bowden said: “We have deregistered as a signatory with our knowledge, consent and direction [but] not reprimanded in any way or found to be non-compliant or non-cooperative.”
Asked whether, as a firm outsourcing trustees to pension funds, it would be more suitable the Code’s category of service provider, Bowden said:
“Our clients and counterparties would not expect us to be on the list and they would be probably surprised if we were. We comply with other things beyond the Stewardship Code, more important to the professionals in the pension trust world.”
According to Bowden among those things are the Pensions Regulator’s requirements and standards. “We meet those standards, as well as audit and internal audit standards for pension companies.”
The FRC said it engaged with third tier signatories and about 20 improved their statements to first or second tier standard. Among those promoted are Franklin Templeton Investments, Nestlé Capital Management, Osmosis Investment Management and Neuberger Berman Europe (see full list on next page).
The other half chose to remove themselves from the list of signatories, the FRC said in a statement.
A spokesperson for the FRC told RI that adherence to the code is not compulsory and any signatory can step aside if they feel it is not working for them.
The spokesperson said the future of the tier system, as well as monitoring of compliance with the Code, will be addressed as part a forthcoming review of the Stewardship Code, in the context of a formal consultation on the FRC’s Corporate Governance Code that will take place later in 2017.
The code was launched in 2010 and one aim to get overseas institutions to sign up. So far just the Ontario Teachers Pension Plan and the Ethos Foundation of Switzerland have done so.
No longer signatories:
– 2CG Limited
– Absolute Fund Managers LLP
– Alder Investment Management Limited
– Alken Asset Management LLP
– Anavon Capital LLP
– Apax Partners
– Baker Steel Capital Managers LLP
– Bell Rock Capital Management LLP
– Boussard & Gavaudan Asset Management, LP
– Cavendish Asset Management Ltd
– CPH Capital
– Daiwa SB Investments (UK) Ltd
– Dunedin LLP
– Elara Capital
– Gladwyne Investments LLP
– Hansa Capital Partners LLP
– Mars Asset Management
– Maven Capital Partners
– Origin Asset Management LLP
– PD Capital Management Limited
– PGIM Fixed Income
– Rogge Global Partners
– The ARCH Group
– The Credo Group
– The Law Debenture Corporation p.l.c
– Windmill Hill Asset Management Limited
Second tier, new entrants:
– Adelphi Capital LLP
– Beagle Partners LLP
– Franklin Templeton Investments
– Nestlé Capital Management Ltd
– Osmosis Investment Management
– Pinebridge Investments Europe Limited
– Veritas Asset Management (UK) Limited
First tier, new entrants:
– Brewin Dolphin
– Charles Stanley
– Fisher Investments
– Miton Group
– Neuberger Berman Europe Ltd
– ToscaFund Asset Management LLP
– TT International