The forum, chaired by James Anderson, partner at Baillie Gifford, will comprise members from across the asset management and pension industries, including representatives from Schroders, Vanguard, Legal & General Investment Management and Royal London Asset Management.
The initiative, which is expected to be operational by June 2014, is also supported by trade bodies the Investment Management Association, Association of British Insurers and the National Association of Pension Funds.
The IMA welcomed the forum, recognising that the fund management industry alone could not drive a successful long-term agenda.
With the intention of promoting broader commitment to long-term strategies and sustainable wealth creation for asset owners, managers and companies, another key objective is to engage with overseas investors and address any issues they face when buying into UK listed companies.
The forum has secured funding for at least two years from investors and trade associations. It will also put in place ‘engagement action groups’, allowing for maximum share of voice and positive outcomes when shared concerns arise over a particular company.
The collective is also calling for companies to hold an annual strategy meeting for institutional investors outside their standard results cycle, where investors and company executives can apply governance to the company’s long-term strategy, without the distraction of its short-term results.
Accountability and governance issues ought then to be applied to the investment process, the forum recommended, which should also keep an eye on potential conflicts of interest.
The Kay Review, which commenced in 2011, concluded that the key problem for UK equity markets was the systemic short-termism caused predominantly by a "decline in trust and confidence and the misalignment of incentives throughout the UK equity investment chain".
The markets had become more fragmented with evermore intermediation, Professor John Kay found, and therefore recommended that a forum be put together facilitate collective engagement by investors in UK companies.
A further recommendation was that when evaluating an asset manager, companies should examine how the manager had engaged regarding the interests of protecting and enhancing future value and assess performance over a longer timeframe.
Fund managers should ask for feedback from company non-executive directors on the quality of their engagement, the report added.
James Anderson, partner at Baillie Gifford and Chair of the Collective Engagement Working Group, said: “This report is a concerted and enthusiastic response by asset managers and asset owners to the Kay Review’s recommendations.
“We insist that improvements in the collective engagement process are not a chimera. They are feasible with consistent and long-lasting effort. Ultimately these improvements can contribute to increased wealth creation by companies and for savers. We must be consistently engaged rather than occasionally outraged or so often apathetic.
Vince Cable, Secretary of State for Business, Innovation and Skills, said the report "acknowledges the need for a shift in the culture of equity investment, focusing on long-term wealth creation and a stronger voice for committed investors".
He also called for "immediate and concrete action to make the forum a reality".
IMA chief executive Daniel Godfrey added: “The IMA is a firm supporter of the Investor Forum. Through the process of the last year’s work on this, it has become clear that asset managers can’t drive a new long-term agenda on our own. Asset managers, asset owners and companies need to work together with total alignment towards the best long-term outcomes for our investors and the economies in which we invest to bring about meaningful change.
“We hope that the new Investor Forum, announced today, will come to be seen as the catalyst that drives that partnership and which brings about a real enhancement in the practice of stewardship by investors.”
