Investor engagement helps drive better returns, notes survey

Nov 27, 2018
Asset managers engaging with companies across range of issues, says Investment Association

Effective stewardship and investor engagement is helping to drive better returns, with a majority of asset managers saying engagement leads to better investment decisions, according to the latest Stewardship Survey from the Investment Association (IA), the trade body that represents UK investment managers.

The survey shows that asset managers are regularly engaging with companies across a broad range of issues, such as executive pay, company strategy and financial performance.

The survey also gives the first meaningful snapshot of how gender diversity is affecting voting decisions, and shows investors are placing a strong focus on gender diversity at the top of companies and voting on the basis of how diverse companies are.

In a sign that investors are pushing for more women in UK boardrooms, the survey finds four in 10 asset managers (42 percent) made a voting decision based on the gender diversity of a company in 2018, while more than half (56 percent) actively engaged with UK companies on the issue of gender diversity.

The survey further finds:

  • Eighty percent of asset managers report that engagement led to better investment decisions           
  • Asset managers are well equipped to support their fund managers to engage with companies: the average firm has 33 staff participating in engagement and stewardship activity, with a mix of portfolio managers, analysts and stewardship specialists conducting this work   
  • Asset managers are engaging regularly with companies they invest in: there were more than 7,000 individual engagements with UK companies in 2018, with each individual asset manager averaging 158 engagements
  • The stewardship process is significantly integrated into the investment process: nine out of 10 asset managers used in-house resources to engage with companies.

Chris Cummings, chief executive of the Investment Association, says in a statement: ‘With more than 30 staff in every firm dedicated to stewardship activities, and with each asset manager making more than 150 engagements each so far this year, it is clear the industry is taking its stewardship responsibilities seriously.

‘Investors clearly want to see more women in the boardroom and senior management positions, and our study shows companies that are lagging behind on gender diversity should expect investors to take action if they do not see enough progress.

‘The fact that more than 40 percent of asset managers took a voting decision based on gender diversity shows they are reflecting those concerns when it comes to engaging with companies and voting at their AGMs. Companies should expect greater scrutiny on diversity issues in the future, and should be acting now to address the imbalances they have at the top.’

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