The week in investor relations: Buy-side spending up, Harry and Meghan move into sustainable finance and SEC to require admission of wrongdoing
– ‘For years, equity analysts and traders saw the value of their services dwindling in the eyes of institutional clients. In the wake of the Covid outbreak, that appears to be changing,’ said Bloomberg. As trading surged and demand increased for economic and market analysis to help navigate the uncertain post-pandemic world, buy-side spending on payments for trade execution and research jumped 11 percent from a year earlier to $7.36 bn in the 12 months through March, according to data compiled by Coalition Greenwich. That’s the first gain in at least five years.
– Prince Harry and Meghan, the Duchess of Sussex, went into the investment business, reported The New York Times (paywall), joining Ethic, a fintech asset manager in the fast-growing ESG space, as ‘impact partners’ and investors. Ethic has $1.3 bn under management and creates separately managed accounts to invest in social responsibility themes. In an interview with the paper’s DealBook, the couple reportedly said they hoped their involvement would democratize investing. ‘Harry and Meghan can make ESG investing part of pop culture in a way that, say, BlackRock’s Larry Fink can’t,’ said the NYT.
– The SEC said it plans to require companies in some cases to admit wrongdoing when they settle civil enforcement actions, the Wall Street Journal (paywall) reported. The announcement marks a return to a policy started during the Obama administration that the SEC largely abandoned during the Trump administration. The commission has historically allowed companies and individuals to settle enforcement probes without admitting or denying wrongdoing, a practice that has made some liberal critics question the value of its policing efforts. Requiring admissions in certain cases will improve the deterrent value of enforcement actions and boost public trust in financial and government institutions, SEC enforcement director Gurbir Grewal noted. ‘When it comes to accountability, few things rival the magnitude of wrongdoers admitting that they broke the law,’ he said.
– The Financial Times (paywall) reported that one of Australia’s largest pension funds said it may make small investments in the cryptocurrency sector, in another sign that retirement vehicles are taking the digital asset space seriously, despite the regulatory risks. Queensland Investment Corporation, which manages A$92.4 bn ($69 bn) of assets and is Australia’s fifth-largest pension fund, told the paper it is open to investing in cryptocurrencies in the future. The move marks the first by one of the country’s ‘supers’, which pool together and manage the retirement savings of millions of people, into the world of cryptocurrency investing.
– The FT also reported on the news that BlackRock’s revenues climbed to record highs during a ‘volatile third quarter’ while assets under management retreated slightly but remained near an industry peak of $9.5 tn. ‘Our long-term flows were great given the quarter we had for markets,’ said chief executive Larry Fink, citing a 10th consecutive quarter of active equity inflows and demand for sustainable active and index strategies. ‘Our [assets under management] decline was a function of a stronger US dollar.’
– ‘Is that my Sainsbury’s order, or the FCA?’ That’s the question CityWire said wealth managers and advisers could soon be asking themselves, with the news that the UK’s Financial Conduct Authority could soon be making home visits. The regulator this week announced that it might need to access firms’ remote working sites to ensure they continue to comply with regulatory responsibilities.
– Reuters reported that, according to the TCFD, only about half of companies it assessed disclosed climate-related risks and opportunities in some form, on average covering around a third of its 11 recommended disclosures. Significant progress is still needed, the TCFD report said after a recent review of more than 1,600 companies around the world. ‘There is clear and growing consensus among investors and regulators on the importance of climate-related disclosure and the need for standardized, transparent data to support capital allocation decisions,’ said Mary Schapiro, head of the TCFD. The task force said more than 2,600 organizations have expressed support for its recommendations, an increase of more than a third since 2020. They include 1,069 financial institutions responsible for assets of $194 tn.
– MarketsMedia said institutional investors representing more than $12 tn in assets under management anticipate downward pressure on their ability to outperform against their return targets, according to the 2021 Fidelity Institutional Investor Innovation Study. While respondents nearly doubled their expected required rate of return, on average, in 2020 (12.3 percent actual compared with 6.3 percent required), only 54 percent said they are confident they will achieve their expected target rate of return over the next three years.
– Chinese state media questioned the ability of online brokers to handle Chinese investors’ personal data for cross-border trading of stocks, reported the South China Morning Post. The paper quoted Nasdaq-listed Futu Holdings as saying it was studying the new Personal Information Protection Law in China and had arranged a team to check and optimize its own operations. The SCMP reported that People’s Daily said risks exist in the use of Chinese citizens’ personal data by online brokers in conducting cross-border trading.
– In other China news, the WSJ reported that Binance, the world’s largest cryptocurrency exchange, is set to end trading involving the Chinese yuan on its consumer-to-consumer platform. The news comes weeks after China made its strongest move yet against the use of digital assets. Binance, which was founded in 2017 and initially based in China, said it would remove the option to buy or sell cryptocurrencies using the yuan in peer-to-peer trading after this year. From that point, any users found to be based in mainland China would be allowed only to withdraw or close their positions, the exchange added.