Assessment of corporate culture has historically been difficult to explain, define and understand but City Hive’s ACT Framework is supporting fund selectors with this by creating a common language around culture. 

Panellists at an event for an institutional audience, held by City Hive and partner Invesco, discussed how having the information that is presented by investment managers answering questions in line with the ACT Framework can help with risk mitigation and identify governance issues - vital for professional fund researchers. 

Further, Mandy Kirby, co-CEO at City Hive, said, the framework and data, housed on the Door platform, provides meaningful information in a transparent way enabling users to track firms’ progress and see how they deal with complex issues. 

Some 150 firms are now reporting in line with ACT on Door and many retail investment management firms have integrated this into their fund due diligence processes including Hargreaves Lansdown and EQ Investors. 

In terms of using the ACT Framework, Sophie Kennedy, joint chief executive at EQ Investors, said it has helped them identify the asset managers they want to invest with, and the data is useful in that it is open-ended - asset managers shouldn’t come to this expecting quotas and box ticking. 

“It is a holistic way to think about who you want to partner with. Our focus is very much on finding asset management partners that we can push on stewardship and engagement. We are not just channelling capital towards those companies that are doing good, we want to partner with companies that want to be better and really engage on that with us. It's an inclusivity thing.”

Sophie also spoke about asking asset managers that hadn’t done so before to complete the ACT Framework, and seeking information on how they are making progress on a particular area brought to light by their answers to ACT questions - this can receive mixed responses. 

“We have had some very positive feedback but there have also been a few cases where the asset manager feels like we have overstepped the mark and they want to continue what they are doing - that’s a red flag for us. 

“We want to collaborate with them.”

Most of the time, clients aren’t necessarily unhappy with a culture but are unhappy with how it is being described - and understanding what this means.

“The challenge is how and where clients can actually talk about culture. ACT helps managers with this,” said Debbie Clarke, former global head of funds research at Mercer and member of the ACT Stewardship Council. “ACT provides structure and keeps culture front of mind - which is absolutely key.” 

“Accountability and transparency are also important because from a cultural perspective we need to make sure that people are held to account and the right behaviour is rewarded.” 

Mandy shared how the Framework has been embraced by investment firms of different types and sizes, with over 150 firms reporting. “It is designed to be flexible and not too prescriptive, and the goal is to create a common language and have better conversations around culture,” she said.

Meanwhile, offering an asset manager’s perspective Stephanie Butcher, CIO for equities at Invesco, added her team also expressly looks at a firm’s culture before making any decisions about investment, and engage further if they do not fully understand the company’s values and direction: “[Culture] tells you a lot about a business in terms of the extent they’re interested in it. We can go into a company and get an overview of the business, and they can talk about strategy and changing their culture and then move on. We say ‘hang on’ and ask how they are actually going to do that - change their culture. 

“We can’t impose but I think a lot about culture is facilitating.”

For more on the ACT Framework, click here.