Institutional investors continue to give priority to issues surrounding corporate strategy and objectives when engaging with investee companies, according to the Investment Management Association’s (IMA) latest report on adherence to the Financial Reporting Council’s (FRC) Stewardship Code by asset owners, asset managers and service providers.
Strategy and objectives, together with board remuneration, were the most frequently addressed issues, with collective engagement between institutional investors continuing to help meet aligned objectives.
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This is the third exercise conducted by the trade body for UK asset managers which received responses from 103 institutional investors (83 in 2011 and 50 in 2010) covering the year to 30 September 2012. The 73 asset managers that took part (58 in 2011 and 41 in 2010) manage £702bn of UK equities (£668bn in 2011 and £590bn in 2010) and represent 36% of the UK market, while the 23 asset owners own £31bn (£31bn in 2011 and £15bn in 2010).
Liz Murrall, IMA Director of Corporate Governance and Reporting, said:
"Institutional investors engage on wide ranging issues related to the long-term strategy and objectives of businesses. In particular, the case studies in relation to a proposed acquisition by G4S and the Xstrata/Glencore merger are examples of how investors successfully engaged and helped steer the direction of these companies to protect or add value for shareholders, the true end clients.
"The report shows that more people are signing up to the FRC’s Stewardship Code, from 75 signatories in 2010 to 241 in 2012, and it is having a positive impact in practice."
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By GlobalDataOther key findings show:
- An increase in monitoring with 76% of the 2012 respondents monitoring all investee companies as part of their investment process, compared to 70% in 2011.
- An increase in resource as the overall headcount of those involved with stewardship continues to rise, with a consistent proportion of respondents demonstrating that stewardship is integrated into the investment process.
- Voting levels increase in all markets in 2012 suggesting that overseas markets are becoming more accessible. A greater proportion of respondents vote all their UK shares – 88% in 2012, compared to 86% in 2011 and 81% in 2010.
- No respondents in 2012 followed service providers’ recommendations without giving due consideration themselves as to how they voted, whereas in 2011 4% of respondents stated they always followed such recommendations.
