The UK government has set up a panel of experts from the fund management industry and academia to oversee a new research project into the “metrics and models” used to assess company and investment performance as part of its response to the Kay Review.
It will seek to address what one senior figure at the RI Europe 2013 conference this week likened to “a bad dating agency” between long-term investors and long-term companies.
The new panel comprises Sarah Breeden, Head of Markets at the Bank of England, Anne Marden, Managing Director at J.P. Morgan Asset Management, Saker Nusseibeh, CEO and Head of Investment at BT Pension Scheme-owned Hermes Fund Managers and Anne Richards, Chief Investment Officer, Aberdeen Asset Management. Academics on the panel include Professor Alexander Ljungqvist of New York University and Oxford University’s John Thanassoulis.
Alongside government officials, they will oversee the initiative unveiled by the Department for Business, Innovation and Skills (BIS), which has launched a competition for external research to feed into a final report, which is due by April 1 2014.
The stated aim is to “create debate and behavioural change” – though performance-related pay for company executives and fund managers is outside the scope of the project.
The 28-page tender is in two parts: the first relates to the metrics and models used to assess the performance of companies by long-term equity investors. The second covers how investments funds are assessed “in the context of designing an investment strategy to meet the needs of investors with long-term horizons”. The issue of misaligned incentives features in both sections.“We have invited a range of expert practitioners and academics to act as a steering panel to inform the research project, to advise the government as customer for this analysis, and promote engagement between relevant experts and the winning bidder,” the tender states.
“A bad dating agency between long-term investors and long-term companies”
Bidders are encouraged to be innovative in their thinking while providing a “value for money solution”.
It comes as Sally Bridgeland, the former investment consultant who heads the £15.3bn (€17.9bn) BP Pension Trustees, discussed long-term investment in a keynote presentation at RI Europe on Wednesday. She explained how BP’s own corporate reporting is being driven by quarterly figures and “stupid questions derived from analysts’ spreadsheets”.
She said: “Isn’t the market a bad dating agency between long-term investors and long-term companies?”
Bridgeland told delegates the Kay recommendations were important in supporting her view that the fund should maintain its long-term approach. She also noted that ‘stewardship’ is a word that resonates at BP because that is how the business is run. Thus the UK’s Stewardship Code for investors is “complementary and supportive”.
The deadline for bids to the government tender is July 8, with notification of winners by the end of that month. The project is expected to start in August with a draft final report required by February 28 ahead of an agreed final document. Tender