FCA orders managers to justify value
M&G CEO proposes ESG scorecard for funds
Consultants steer trustees to own fiduciary services, CMA alleges

UBS expects active managers to thrive as volatility surges

Moves: Railpen names CIO; Thain to resurface at Deutsche

FCA orders managers to justify value
The Financial Conduct Authority (FCA) published new rules and guidance this week on the disclosure of fund charges and objectives, which follow on from its Asset Management Market Study. From 18 months hence, managers will be required to make an annual assessment of their funds’ value to “assess and justify to their fund investors the charges taken from the funds they manage in the context of the overall service and value provided.”

The FCA also confirmed its demand that asset managers disclose an-all in fee, incorporating transaction costs. Additionally, funds must appoint a minimum of two independent directors to their boards.
The new rules specify that box profits (from investors buying and selling funds) must be repaid to the fund. Managers no longer need to seek consent from individual investors to move them into cheaper but otherwise identical share classes.
The regulator began a consultation yesterday looking at how fund objectives and benchmarks can be expressed more clearly, especially for benchmark-constrained strategies. The consultation will also review performance fees, which the FCA is considering forbidding managers from levying on gross performance. It is seeking feedback by 5 July.
Furthermore, the FCA has been investigating the impact of different ways of disclosing charges on investors’ decisions and published an occasional paper this week. The most effective disclosure method was a review screen, providing a summary of costs and a comparator chart showing the fees of similar funds. It appeared after investors had selected a fund, inviting them to confirm their choice or go back to consider other funds.
M&G CEO proposes ESG scorecard for funds
Anne Richards, CEO of M&G Investments, has proposed introducing a standardised scorecard for measuring funds’ investment returns alongside their ESG credentials. Writing in the Financial Times yesterday, she suggested that active and passive funds report on their environmental impact, carbon footprint, supply chain sustainability, social impact, and diversity and inclusion.
The scorecard would need to be a cross-industry initiative, developed in conjunction with investment consultants and fund rating agencies, potentially with input from exchanges and index providers, Richards recognised.
Society expects asset managers to be responsible stewards of investments and to “invest with a wider purpose than just a narrow, financial lens,” Richards argued. “We all know that what is measured matters. We need to make sure that we measure what matters.”
Consultants steer trustees to own fiduciary services, CMA alleges
Investment consultants (IC) could be steering their pension fund clients towards their own fiduciary management (FM) services, without trustees fully considering other providers, according to a working paper from the Competition & Markets Authority. The CMA said it had seen examples of ‘IC-FM firms’ “having strong and persistent strategies to sell FM to existing IC clients” and “mentioning their own FM service to IC clients, but not mentioning other FM providers.”
Only 13 per cent of UK pension funds use fiduciary managers, according to a survey conducted by the CMA. Of those schemes, 74 per cent also buy investment consulting services from their fiduciary manager. When appointing their first FM, around half of all schemes (47 per cent) select their incumbent IC.
Spence & Partners told the CMA that pension funds rarely embark on a competitive tender process when moving from investment consulting alone to a fiduciary mandate. JLT agreed that the move from IC towards FM is usually a gradual, evolving process rather than a cliff edge.
Aon Hewitt highlighted to the CMA that schemes using the same IC and FM provider benefit from economies of scale, such as shared costs and the ability to negotiate lower fees with asset managers.
UBS expects active managers to thrive as volatility surges
UBS believes active managers will have more opportunities to deliver alpha this year on the back of rising volatility, Citywire Wealth Manager reported. The Federal Reserve has instigated five rate hikes since 2015, driving up corporate funding costs, which will squeeze margins and increase earnings uncertainty. Market volatility is not only correlated to earnings uncertainty, but it tends to rise two years after Fed rate hikes, according to UBS’ research. Volatility is also correlated to the dispersion of returns, so as both rise, the onus will be on active managers to prove their mettle.
Last year was also a relatively good period for active equity managers, who delivered an average 85 basis points of alpha, although only 49 per cent of active equity funds beat their benchmarks after fees. This followed a challenging 2016 when active managers lost an average 246 basis points after fees, their worst performance in 20 years.
Most markets rose in 2017 and higher beta small- and mid-cap strategies outperformed large-caps across all geographies. The spread between ‘smid-‘ and large-cap performance was considerably greater in the UK than in Europe, the US, or global equities. Of these regional categories, global funds enjoyed the highest returns last year, while the UK was the laggard, dragged down by its large-caps.
American Century Investments in Kansas City, Missouri, has hired three ETF specialists: Matt Abatecola and Ross Kamovitch, who were Regional Sales Associates at WisdomTree Asset Management, and Margaret Dorn, who was a Business Development Officer at Milliman Financial Risk Management.
Antipodes Partners, a global equity manager in Sydney, has hired software designer Kieran Rabbitt from Dimensional Fund Advisors as a Quantitative Investment Specialist, responsible for portfolio analytics and systems development. Antipodes has also hired two Investment Analysts from Magellan Financial Group: Aidan Kerr and Vinayak Muralidharan. Additionally, Director Andrew Findlay has been promoted to Managing Director. He will take on some of CEO and CIO Jacob Mitchell’s management responsibilities, to allow Mitchell to focus more on investment performance.
BMO Global Asset Management has hired Bart Kuijpers as a Managing Director to run its fiduciary management business in the Netherlands. He was CEO of International Pension Platform, an open-architecture pension provider he founded in 2014. BMO GAM also brought in PGGM’s Pieter van Stijn as a Director in its governance and sustainable investment team, based in the Netherlands. Additionally, the firm has promoted London-based Alice Evans and Claudia Wearmouth to Co-Heads of Governance and Sustainable Investment.
The Church of England Pensions Board (CEPB) has appointed John Ball as CEO, effective 1 July. He is CEO and Secretary for the Diocese of Chelmsford and will replace Bernadette Kenny, who passed away last October.
Deutsche Bank plans to nominate John Thain, the former CEO of Merrill Lynch and of the New York Stock Exchange, to join its supervisory board. The German Bank will also put forward PwC’s Senior Partner and Chairman for Germany, Norbert Winkeljohann, IHS Markit’s Michele Trogni, and former Morgan Stanley banker Mayree Clark. Shareholders will vote on these appointments at the bank’s AGM in May. Separately, Deutsche Bank’s Chairman Paul Achleitner has begun an informal search for a new CEO.
Katey Bogue has joined eVestment from its parent company Nasdaq to be Head of Private Markets.
Outsourced CIO specialist Hirtle Callaghan & Co. in West Conshohocken, Pennsylvania, has named Mark Hamilton as CIO. He was CIO of Asset Allocation at OppenheimerFunds.
Andrew McCarthy will join Janus Henderson on 9 July to co-manage its European long-only funds. He spent the past decade at USS Investment Management as a Portfolio Manager specialising in the industrial and consumer sectors.
South Korea’s sovereign wealth fund, the US$110.8 billion Korea Investment Corporation (KIC) has appointed Heenam Choi as CEO. He was an Executive Director of the International Monetary Fund. He replaced Sung-soo Eun, who left KIC last September to run the Export-Import Bank of Korea.
The London Pensions Fund Authority has named Robert Branagh as Managing Director. He is President of the Pensions Management Institute.
Peter Geikie-Cobb will join MitonOptimal Group later this month as Senior Fund Manager. He will co-manage the Coram Global Defensive, Balanced and Opportunities multi-asset funds alongside James Sullivan. He is a former Managing Director of Matterley, Charles Stanley's Fund Division.
Bjarne Graven Larsen, CIO of the Ontario Teachers’ Pension Plan (OTPP) has resigned to return to Denmark with his family. CEO Ron Mock will replace him on an interim basis until a successor is appointed.
Michele Russo, a former Managing Director at Terra Firma, has joined Park Square Capital in London as Head of Funds Special Situations. He will provide financing and structuring solutions for European private equity portfolios.
RMPI Railpen has promoted Investment Directors Richard Williams and Paul Bishop to CIO and Head of Private Markets, respectively. Both are newly-created positions. RMPI has been revamping its strategy to in-source investment management and move away from asset class silos.
Waddell & Reed Financial has appointed Elizabeth Hansen as Chief Compliance Officer of its subsidiaries Waddell & Reed and Ivy Distributors. She joins from Ameriprise Financial Services to replace Shawn Mihal, who was promoted in November to President of Waddell & Reed, the firm’s broker-dealer.
Emma Wallis
Head of News and Insight