Asset managers told to ‘be more visible’; Backlash feared unless industry presents a more human face

November 28, 2013 11:32 am

Asset managers told to come out of the shadows

By Gillian Tett

Backlash feared unless industry presents a more human face

In recent years Helena Morrissey, head of Newton, the asset management group, has attracted much attention. She is something of a rarity, being a truly senior woman in British finance, and she has used that platform to speak out on many issues including the 30 per cent campaign, which aims to get more women on British boards. But Ms Morrissey is currently promoting another cause: the profile of the British asset management industry. Earlier this month she delivered a speech to the CFA Institute in London, in which she urged fund managers to become far more vocal and visible.One of the biggest threats that now hangs over the industry, she declared, is that asset managers are often tarred with the same (negative) brush as bankers. While this may reflect prejudice – or public ignorance – the situation is partly the fault of asset managers, since so few of them are willing to talk openly about their business in a proactive, human fashion.

Instead, asset managers tend to hide “behind the scenes”, avoiding tough questions about issues such as investment fees, or even commenting about economic trends. But unless investment managers directly engage with criticism, to explain what their industry does and why it has a social function they will be “sitting ducks” for a future backlash about fees and face growing complaints that they are “milking” customers.

“How I think we can improve our social value is that we stop whining and more constructively engage,” Ms Morrissey says. “I would like to see more fund managers on the radio, on television, in schools. High-profile individuals should take on high-profile issues.”

Now these stern admonishments will undoubtedly infuriate some of Ms Morrissey’s colleagues. After all, in the aftermath of the 2008 credit crisis, financiers of all variety have avoided sticking their heads above the parapet, let alone jumping into mainstream television. In any case many asset managers, unlike investment bank salesmen, say, lack the temperament to grab the limelight.

Ms Morrissey’s comments are, nevertheless, striking. For behind them lies a much bigger point or, more accurately, a sense of imbalance in the financial world as a whole. In decades past, banks have zealously promoted their interests via public relations groups and lobbyists. But even as journalists’ inboxes were filling up with missives from sell-side lobby groups, particularly during the credit bubble, asset managers generally seemed quiet, if not invisible and passive. Buy-side promotion was limited.

It is tough to present a “human” face when people fear that they are about to come under attack. But hiding behind public relations officials is no solution in a crisis either

Logic might suggest this imbalance should have corrected itself after the credit bubble: since 2008, the buy-side has had a strong reason to demand significant change, given how badly it was burnt. Indeed, it could be argued that the credit bubble would never have become quite so egregious if the buy-side had been more outspoken about protecting its interests before 2008 and if it had had as big an input into regulatory policy as the sell-side.

In practice this rebalancing has not occurred to any degree, or not at

least in Europe: though bank lobbyists remain hyperactive, the asset management industry has been far quieter (except, perhaps, in the US where there are more characters like Morrissey). Some asset managers blame that on the fact that the buy-side is more fragmented: it is much harder to create a single, strong voice when you are dealing with hundreds of different investment management companies, than a handful of big banks. But another reason may simply be that asset managers have felt less inclined to band together since they have hitherto not been under attack as severely as bankers.

But that is no reason for complacency, Ms Morrissey observes. Shortly before she issued her admonishments to the CFA managers, Martin Wheatley, the head of the Financial Conduct Authority, issued his own speech that warned that regulators were stepping up scrutiny of issues such as fees, compensation and transparency. That may be simply a shot across the bows of the industry, or it may herald a wider future clampdown. Either way, with investment returns having shrivelled in recent years, there is clearly potential for a wider public backlash.

Of course, this is not a climate that is conducive to persuading those publicity-shy managers to jump into the fray or on to a television screen. It is tough to present a “human” face when people fear that they are about to come under attack. But hiding behind public relations officials is no solution in a crisis either – just ask those unloved bankers. Either way, British asset managers would do well to heed Ms Morrissey’s appeal and act on it, or else work out a system for cloning her.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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