Latest figures show engagement leads to better investment decisions

Thursday 21 September 2017

The Investment Association and Pensions and Lifetime Savings Association joint report on ‘Stewardship in Practice’ shows that the engagement between asset managers and asset owners and UK companies is having a positive impact on investment decisions and ultimately value.

The report demonstrates that the investment chain is working as intended. Asset managers, which tend to engage and vote in house, are maintaining high standards of stewardship. Whilst most asset owners outsource their stewardship activities, a substantial core are integrating it into their investment practices and 68% now include a stewardship policy in their Statement of Investment Principles.

For those respondents that conduct stewardship in-house,

• Almost two thirds reported that engagement with UK companies resulted in somewhat or considerably better investment decisions
• On average, respondents’ engagement was excellent for nearly a quarter and good for 44% of UK companies
• 27% of respondents noted an improvement in terms of the quality of engagement compared with the previous year

Respondents that engage in-house have good resources to do so, with this task mainly falling to portfolio managers, as opposed to dedicated stewardship specialists, demonstrating that stewardship is being integrated into the wider investment process. This engagement encompasses the dialogue with companies on all issues that relate to its long-term value, as well as on issues that are the immediate subject of votes at general meetings. Executive remuneration has tended to be the focus of engagement, however the report notes that other drivers of long term value should be considered.

Asset manager respondents are also increasingly reporting publicly on their stewardship activity. The public disclosure of voting records is continuing to improve with 72% of asset managers now disclosing details of their engagement. Around half of the asset manager and 20% of asset owner respondents also publicly disclosure their wider engagement with companies.

Chris Cummings, Investment Association, CEO said:

“High quality engagement is key to the important role of the investment management industry. It has an essential place in ensuring that companies take long term decisins which offer the best returns to investors and savers. The asset management industry must take an active role in engaging on company’s strategy in the interests of driving long term value.”

Joe Dabrowski, Head of Governance and Investment at the Pensions and Lifetime Savings Association, said:

“At the heart of this research is the simple message that communication is key to good outcomes for asset owners as well as asset managers. Workplace pension schemes have £1.9tn of assets under management in the UK and are therefore keenly interested in not just how an investment performs in the short term but its long-term value. The research highlights the steps that institutional investors are taking on an ongoing basis to ensure that high standards of stewardship are built and maintained.”

Notes to Editors

Methodology: 77 asset managers responded and as at 30 September 2016 these held £563 billion of UK equities – approximately 62% of the total for the UK’s asset management industry. All except two were signatories to the Stewardship Code. 51 asset owners responded and whilst these represent a small proportion of the UK pension universe –inevitably they are more engaged with stewardship issues than is typical. Five service providers responded.

For more information contact:

Linsey White, Head of Media Relations, The Investment Association: [email protected]
T +44 (0)20 7269 4635; M +44 (0)7508 724 022

Lee Blackwell, Head of Media, PLSA
T: 020 7601 1726, M: 07713 073023, E: [email protected]

About the Investment Association:

• The IA champions UK asset management, supporting British savers, investors and businesses. Our 240 members manage £6.9 trillion of assets and employ 93,500 people across the UK
• Our members manage the pensions of 75% of UK households, provide 60% of capital market financing for UK businesses and fund 40% of initial public offerings of shares.
• Our mission is to make investment better. Better for clients, so they achieve their financial goals. Better for companies, so they get the capital they need to grow. And better for the economy, so everyone prospers.
• Our purpose is to ensure investment managers are in the best possible position to:
  • Build people’s resilience to financial adversity
  • Help people achieve their financial aspirations
  • Enable people to maintain a decent standard of living as they grow older
  • Contribute to economic growth through the efficient allocation of capital
• The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
• The UK is the second largest investment management centre in the world, after the US and manages 37% of all assets managed in Europe.

About the Pensions and Lifetime Savings Association:

We’re the Pensions and Lifetime Savings Association; the national association with a ninety year history of helping pension professionals run better pension schemes. Our members include over 1,300 pension schemes with 20 million members and £1 trillion in assets, and over 400 businesses. They make us the voice for pensions and lifetime savings in Westminster, Whitehall and Brussels.

Our purpose is simple: to help everyone to achieve a better income in retirement. We work to get more money into retirement savings, to get more value out of those savings and to build the confidence and understanding of savers.