The Investment Management Association (IMA) this week published a survey of UK institutional investors’ engagement with the companies they invest in. The survey covers 50 institutional investors, including 41 asset managers holding some £590 billion of UK equities (31% of the UK market). The report follows on from the stewardship code of conduct launched last year. Cynics might argue that a survey of institutional fund managers to ascertain how they are behaving could end up being self-serving. The IMA is after all the trade body for the fund management industry. Nevertheless, putting cynicism aside for the time being, the survey does make for very interesting and worthwhile reading. It is available here.
At the very least, this survey shows that an increasing degree of lip service is being paid to the pressing issue of institutional investor engagement and hopefully much more than just that. Liz Murrall, Director of Corporate Governance at the IMA, said:
“The aim of our survey was to find out what stewardship means in practice.... Our survey reveals a picture of real long-term commitment to achieving value for shareholders. Much of the dialogue between companies and their investors takes place behind closed doors, but our survey illuminates that process, showing real and productive engagement which ultimately improves the governance of major UK companies.”
Just on that quote, we found it amusing to see this implied acknowledgement of the pervasive information asymmetry that exists in the UK, and yet to note that not once in this in the 51 page document is the issue of "selective disclosure" or the need for Regulation Fair Disclosure discussed. There was this rather brief quote from Fair Pensions on page 35:
“Transparency, through public disclosure, is imperative for demonstrating and exercising accountability".
However, this was in the context of whether the institutions were putting on their website their (often bland) public statements on how stewardship responsibilities are to be discharged. This omission presumably reflects the fact that the FRC's Stewardship Code fails to tackle the core market transparency issue of enforcing full openness of corporate disclosure and stamping out selective disclosure, other than stipulating this under the guidance to Principle 7:
Transparency is an important feature of effective stewardship. Institutional investors should not, however, be expected to make disclosures that might be counterproductive.
Again,…
