Friday, 28 August 2009

Interesting piece from Hermes

In the Torygraph, here. It's certainly a decent statement of the situation as we find it currently:
However, the simple fact is that most pension funds are currently not equipped to engage actively with the many and diverse companies they own, and, rather unfortunately, neither are the vast majority of the asset managers they employ.

frankly, the real problem is that too few investment institutions can be bothered to undertake engagements in the first place or devote the resources needed to make it work properly.

But I still don't see the answer to the question of how we get this to change. There's an argument for collaboration (or it might be a coded plug for 'appoint Hermes'!):
To access the skills necessary to undertake constructive engagement across their wide and diverse ownership base, pension funds need to find ways of working together, sharing an effective resource and aggregating their assets to achieve
more leverage.

In fact this type of thing already happens through LAPFF. But even that, as a coalition of almost 50 funds, has less assets than many of the big fund managers. It's certainly a step in the right direction, and I've often wondered whether there is scope to get other investors to affiliate to it, but it's currently a small chunk of the market. And even when it does seek to get investors to work together, not everyone wants to pull in the same direction - see the failure of some asset managers to back its resolution at M&S for example.

And the elephant in the room is really the corporate pension funds, whose commitment to engagement is non-existent in most cases, with a few notable exceptions. Hermes is certainly to argue that if there is going to be change it needs to be built on the pension funds:
But the only way this new found enthusiasm is going to actually make a difference is if we are all clear about the need for pension funds to exercise their responsibilities for good corporate governance and by insisting that investment managers demonstrate the necessary commitment to serve them
But how do we convince those funds to take up the challenge? Especially when employer commitment to them is dying off.

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