It’s been a rough old time for the fund industry. First, the Volkswagen emissions scandal put a question mark over the utility of environmental, social and governance (ESG) research.
ESG creates such a nice, cosy feeling, but if companies are cheating away behind the scenes, what good does it do?
Of course, not all companies cheat. And not all ESG investors failed to spot VW’s Pinnochio nose. But the whole nasty business put a firecracker under the notion that we’re all environmentally friendly now.
Second, Daniel Godfrey got booted out of/stepped down from (delete as you consider appropriate) his role as chair of the UK Investment Association (IA). I cannot pretend to know why. The IA’s statement on Godfrey’s departure as chief executive was anodyne. Much significant contribution and important initiatives.
“Insiders” too coy to be named told the press it was because Godfrey was “ploughing ahead with his own agenda without consultation”. That agenda, which seems mainly to have been about fees and executive pay, prompted Schroders and M&G to threaten to leave the association. Cue panic. One assumes.
Outsiders, by contrast, were queuing up to be named – and to provide forthright comment. Gina Miller, founder of the True and Fair Campaign, accused the rebels against Godfrey’s leadership of being
anti-consumer.
Robin Powell, a campaigner for positive change in the investment industry, suggested Godfrey’s ousting was the latest protectionist salvo from an active fund industry “that has been found out, that is living on borrowed time”.
Powell doesn’t have high hopes for Godfrey’s successor. “We shouldn’t expect too much of them,” he wrote on his blog, The Evidence-Based Investor. “Their job won’t be to encourage change, but to resist it.” The True and Fair Campaign thinks the same. On Twitter, it mocked up an advert for Godfrey’s successor that read: “The [Investment] Association must ensure investment funds remain as opaque as possible.”
Whether or not that is a true reflection of the IA’s aims, the association isn’t helping itself. The press release it sent out the day after it sent out the press release announcing Godfrey’s eviction was a model of opacity – or perhaps excessive delicacy. It referred to “recent events” and “recent news” but did not say what they were.
Investors are not impressed. Between the two IA announcements, Corporate Adviser magazine ran a poll of advisers and consultants in the defined-contribution pensions industry at a summit it happened to be having. Thirty-nine per cent said they were more distrustful of the fund management industry as a result of Godfrey’s departure.
And as if that weren’t enough, shortly afterwards Chris Ford, global head of investment at Towers Watson, told the Financial Times the asset management industry was not fit for purpose.
Grim. But there is a silver lining and, as so often, it comes from Emolument.com, the how-much-are-you-paid consultants. At the end of September, it revealed that a number of rugby players earn more each year – £1m in the case of Dan Carter of New Zealand – than directors of asset management, who on average trouser just £160,000.
Fees may still be an issue, but perhaps there’s no need for an investigation of fund management executive pay if you can get more for throwing a funny-shaped ball around – or for being a thorn in the side of your peers.
Only two rugby players in the Emolument ranking – Carter and Matt Giteau of Australia – take home more than Godfrey did: £533,000.
But, hey, like rugby, it’s a short career.
Fiona Rintoul is editorial director at Funds Europe
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