Wednesday, 14 September 2011

Bondholder activism... Or not

I was at the ICGN conference for a bit this week. It was one of the most boring conferences I have ever been to, and I'm sad enough to generally fund this stuff interesting. I think it was partly that it wasn't really clear who the event was designed for. Like many conferences in this sector, asset manager delegates are far more numerous than asset owners. Also my own view is that it has tilted to far to the corporate agenda. So does not even feel like an event for fairly mainstream investors with an interest in Corp gov.

That said there were some interesting snippets in there - and I say this as someone who voluntarily chose to go to breakout sessions on bonds and accounting standards (the latter is actually really interesting, but I don't usually sa that publicly). The bonds session started slowly but had some good bits to it. I'm personally still a bit sceptical about what you can do in this area, but since a lot of asset owners hold a lot of fixed income it seems worth a try.

And having sat through the session I'm still a bit sceptical about what you can do, though it's something I plan to take more of a look at. Just a few random thoughts. It seemed to be a fairly commonly held view that the interests of bondholders amd shareholders were likely to be in conflict in many situations. One of the speakers argued that whilst shareholders might want to be activists, bondholders were 'stabilists'. He also made the point that the creation ofvcredit default swaps meant that the need for bondholder oversight was reduced further. And whilst there were cases of bondholders seeking governance guarantees, the real action seemed to be around the covenant.

It's fair to say to that contributions from the floor were somewhat sceptical too, and given that they came from some pretty senior figures this added a bit of weight to them. I did note that it's possible that the FRC may tweak the Stewardship Code to refer to other asset classes, though I wasn't clear why, given the preceding comments.

So, all in all, not convincing. Yet.

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