Expectations on culture transparency are gaining momentum
“ACT is such a powerful tool for the wealth management and asset manager industry.”
Fund buyers discussed how they assess cultural fits when working with asset managers in the final session at the ACT 2nd Birthday Party, and shared how using the ACT framework has improved transparency, engagement and responsibility among investment professionals over the past two years.
Moderator Richard Romer-Lee, CEO at Square Mile and Titan, posed the question to the panellists of how they assess culture in their investment decision making, with the responses highlighting how much this has gained traction and improved over the last two years.
Sophie Kennedy, joint-CEO at EQ Investors, said: “Let's talk about pre-ACT and post-ACT.
“Pre-ACT there was nothing where you could go in and try and consistently measure the non-tangibles in such a way. Bev and Mandy have created this ACT framework where essentially, across all asset managers in the world, we have streamlined transparency and consistent reporting.
“What does that reporting look like? It's not a quant-based tick box exercise. It is looking under the bonnet and it's asking difficult questions - and actually just asking the question is half the battle as asset managers start thinking about things that they've never been asked before, and that actually triggers action.”
Sophie added that EQ Investors has engaged with all the asset managers it works with to request they report in line with the ACT Framework, and they will be following this up with them in due course.
“So much of [culture] is non-tangible - compared to say analysing performance - and we are pragmatic in terms of how much time fund analysts have to really dig under the surface as to what’s going on. There’s not a lot of time in the day to get into the nitty gritty about the turnover within a particular team, for example.
“That is why ACT is such a powerful tool for the wealth management and asset manager industry, and we are hoping we will be sitting here at the end of the year with 50 Signatories.”
Mona reiterated Hargreaves Lansdown will not invest in funds where the asset manager is not an ACT Signatory, something that was highlighted in a previous session, and also flagged plans to include the ACT logo on Hargreaves Lansdown fund factsheets where the asset manager is an ACT Signatory to improve investor awareness around the Standard.
“We are not quite there yet but we will have a badge on fact sheets to show when we have assessed a group and it is a Signatory. It tells our clients we have done our homework, the asset manager has done its homework, and they can trust the outcome of that.”
Moderator Richard also asked panellists to explain how much awareness their clients have concerning the culture of firms impact on investment outcomes.
Sophie said in general, consumers are becoming more conscious of where products are coming from, how they are produced in terms of impact on the environment and also whether workers are being treated fairly.
“People want to better align their values to who they’re partnering with, who they want to be associated with and which products they are buying. They are more conscious of the impact they are having on the world, not just in investments but their footprint more broadly. They are demanding more transparency and they want to see more accountability.”
Sophie also flagged the reputational damage companies face when they are caught out in terms of not carrying out necessary due diligence on their operations.
“We’ve seen the negative consequences only too recently in this industry - the client backlash, the damage to your reputation, the potential legal repercussions. Broadly, companies are having to adhere to a higher level of values full stop, not just in our industry.”
Turning to the fund management space, Simon Evans-Cook, fund manager at Downing, added culture is “super important at both ends of the scale”.
“We used to think our relationship [when investing in funds] was between two people but it's actually me, the fund manager and a third person which is the firm they work for.
“What we have had before is where the fund managers sees themself as a long-term investor but the CEO sacked them halfway through a bad spell - that turns me into a false seller at the worst possible time. The culture of the business is so important.”
HL’s Mona added: “We recognise the trust we need to feel about the asset managers. Without that culture, without knowing how people are learning from mistakes, without knowing what challenge really means in an organisation then we cannot say, yes, we believe in this fund manager.
“We have to believe they have the potential to do better over time and if we aren’t asking those questions around culture, we can’t say we are trustworthy ourselves.”
She also highlighted it is important for fund selectors to look inwardly at their own firms:
“We test the asset managers we actively promote and we have to test ourselves because that is what is expected.”
To find out more about how to become a Signatory to ACT click here.
To watch the previous panels from the ACT 2nd Birthday Party click here.