Asset managers have been quiet about the independent non-executive directors they have hired to their fund boards under Financial Conduct Authority requirements that must now be in place.
Asset managers were required to appoint two independent non-executive directors to authorised corporate director (ACD) boards by 30 September. These directors would also play an important part in the value for money assessments fund boards are required to do for each annual report from now on.
Both changes came out of the FCA asset management market study.
The final rules stated fund boards should “look outside the usual pool of candidates” and also said financial services experience was not a prerequisite for iNeds.
Official announcements few and far between
Around 190 fund boards are required to comply with the rules although some already had iNeds in place before the FCA changes came into effect.
Franklin Templeton Investments and Royal London Asset Management are among the few fund houses that sent press releases touting their iNed appointments.
Franklin Templeton has appointed Confederation of British Industry deputy director general Henrietta Jowitt, asset management consultant Antony John and former JP Morgan Asset Management consultant David Brigstocke.
RLAM appointed former Aberdeen Asset Management executive John Brett and Nora O’Mahony, who is head of fund and product development at Fidante Partners.
Montfort Communications founding partner Gay Collins, who is also a non-executive director on the JP Morgan Global Growth & Income investment trust said she would have expected “constant” announcements about iNed appointments in the six months preceding the FCA deadline.
“You’d have thought that when you take on someone independent you’d want to make a bit of a thing about it because they’re taking on a very skilled expert, who should be one of the selling points of the fund,” Collins said.
Old boys’ network
Mosaic Ned founding partner Paul Boughton is frustrated that a number of asset managers have relied on their “old boys’ network” for fund board appointments. Mosaic Ned is a training and recruitment organisation for UK fund boards.
“Some of the stories I hear about the way that some of the iNeds have been hired would make your hair curl. In our view, it’s not been in the spirit of the FCA’s asset management market study.”
Boughton reckons this could be one reason why asset managers have not been highlighting these promotions.
Boughton adds: “What we need to see is the FCA looking at this again, very, very quickly and trying to push this initiative forward by increasing the number of iNeds on boards to a majority.”
FCA wants boards to be more independent
But Funds Board Council chief executive Shiv Taneja thinks there are a number of reasons fund boards have not promoted these appointments more heavily.
These include that some fund boards already had the required iNeds in place before the FCA changes came about and that international fund managers already have iNeds in other jurisdictions and therefore do not see the UK changes as particularly noteworthy.
Axa Investment Managers, for example, says its three independent non-executive directors – Colin Clark, Paul Dackombe and Hans-Christof Kutscher – have been in place before the FCA changes were revealed.
Likewise, JP Morgan Funds Limited appointed Ruston Smith as its independent chair in December 2016.
Taneja adds a number of asset managers may view fund boards as a function that happens behind closed doors – an attitude he reckons the FCA would like to see changed.
“What are the three things the FCA are looking for from these boards and for investors? A greater transparency in the way they operate, a greater focus on value and a general greater sense of governance.
“A natural outcome of that is that as an investor, if you want me to be taking the output of what the board does more seriously, then it would be helpful if I knew a little bit more about what they do and who they are.”
The iNeds asset managers have appointed
Boughton says the people that have gone through his training have had industry experience ranging from accounting, risk and compliance, as well as being CIOs and CEOs.
Portfolio Adviser reached out to a number of asset managers to find out who they had appointed to their fund boards.
Baillie Gifford is among one of the few that responded that has appointed iNeds with investment trust backgrounds, with Kate Bolsover and Dean Buckley joining. The asset manager’s authorised corporate director to which the pair have been appointed is also an alternative investment fund manager (AIFM).
Baillie Gifford director for European funds operations Derek McGowan said it took a couple of months to get regulatory approval but that the recruitment process began in summer 2018 and it had picked its preferred candidates by the end of the year.
Another investment trust hire has been made over at Standard Life Aberdeen in Carolan Dobson while former Brewin Dolphin chair Jamie Matheson was also appointed. The positions were confirmed last year.
Alongside, its appointment of Smith in 2016, JP Morgan Asset Management’s fund board hired Kate Smith, a former M&G and Blackrock portfolio manager, to its board in June.
Merian made its appointments in February 2018 ahead of its spin out from Old Mutual with the Merian Investment Management Ltd authorised by the FCA in July that year. Mark Skinner, a senior adviser to Blue Whale and iNed at Embark Group, and Douglas Shaw, who is on the investment committees of Lady Margaret Hall and Westminster Abbey, are Merian’s two appointees.
