UK fund managers' ethics code remains in the 'long grass'


In August 2015, the Investment Association, which represents fund managers with £5.5 trillion in assets, said around 25 of its 200 members had signed up to its Statement of Principles, designed to ensure signatories put clients’ interests first.

But despite receiving the backing of big-name fund managers like BlackRock and Old Mutual Global Investors, it was noted at the time that more than half of the asset managers represented on the IA’s board had failed to sign-up.

The following December, the IA said the code required “further consideration” and that it would report back after an “implementation discussion”, though no timescale was set.

On August 12, a spokeswoman for the IA said “our position has not changed”.

The current state of play underscores the change in strategic direction at the trade body since the departure in October 2015 of its former chief executive Daniel Godfrey, who had championed the principles.

High-profile investment firms including M&G Investments and Schroders had threatened to end their memberships of the IA in part because of the code, which they felt added further to the red-tape already being imposed by national regulators in the post-financial crisis world.

Godfrey was eventually forced out of the IA over a split over the direction of the trade body, which some felt had become too focused on embracing new regulations rather than representing the interests of the IA’s members.

Since his departure, the IA’s risk and compliance director Guy Sears has been working as interim CEO. He will be replaced by Chris Cummings, the boss of TheCityUK, on a permanent basis in September.

A senior regulatory figure working in the City of London said: “The Statement of Principles was kicked into the long grass months ago by Guy. Now, Chris will have to decide whether or not to leave it there.”

The IA’s new direction of travel was further evidenced last week when it published a report concluding there was “zero evidence” that fund returns are affected by hidden fees. Godfrey and others campaigning for greater levels of transparency in fund management were quick to question the report’s findings.

The Statement of Principles is the second industry initiative aimed at improving standards in the UK’s investment community the introduction of which has been put on hold.

FN reported earlier this month that plans by the UK’s Financial Reporting Council to name and shame fund managers and pension funds failing to take their stewardship duties seriously had been delayed until later this year.

The UK’s Stewardship Code requires signatories to report on issues including voting and conflicts of interest at the firms in which they have stakes, with the aim of improving long-term returns for investors.

The FRC, chaired by City grandee Sir Win Bischoff, said in December that it would publicly tier firms based on how well they were adhering to the code from this summer. Bischoff told FN at the time: “There is, of course, an element of naming and shaming about it.”

But these plans have been postponed until later in 2016, largely because of a lack of engagement from the buyside.

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