Companies facing increased engagement from bond holders – TUC survey

Annual fund manager voting survey released

Institutional investors in the UK are increasingly using a ‘stewardship’ approach to their fixed income holdings – meaning companies are now facing engagement from their bond holders as well as shareholders – according to a new report from union umbrella body the Trades Union Congress (TUC).

The report, the TUC’s 11th annual fund manager voting survey, is intended to give pension fund trustees information on how various fund managers exercise voting rights in relation to controversial issues at company annual meetings (AGMs).

Most respondents to the report said they applied a stewardship approach to their equity holdings.

But, as the TUC notes, “perhaps more notable is the fact that 17 respondents, a clear majority, stated that they apply a stewardship approach to fixed income assets”.

The TUC said that given the number of respondents, and the fact that they include some “large, well-known” asset managers, “presumably companies will have recognised that they now face engagement from bondholders as well as shareholders”.The body said this engagement has not yet appeared to attract any comment: “It therefore seems to be worthy of further exploration.”

It was noted by one respondent that the Bond Committee at the Association of British Insurers (ABI) “undertook some engagement activity”.

Other respondents said they are applying a stewardship approach to property (nine respondents) and private equity (four).

The TUC found evidence that some asset managers were more willing to vote against management over remuneration issues last year. And there was also an overall reduction in the proportion of abstentions, whereas oppose votes increased – which the TUC says suggests a tougher approach on the part of some investors.
But many asset managers continued to support managers on “most issues most of the time”.
A large majority of investors said their engagement with companies was not affected by regulatory barriers, such as insider trading and concert party rules. Instead, a lack of resources affected their ability to engage.