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Fund Managers: Mixed Messages Require Clarity

12th Oct 2022
For fund managers looking to list funds and structures, there are numerous industry bodies, thinktanks and consultants who publish their thoughts on best practice.

Each arguably has the best interests of the industry at heart but sometimes the multitude of opinions can make it a confusing process when trying to list a structure or fund. Our team of experts have been helping with listings for over 30 years, including the listing of JTC PLC on the London Stock Exchange in 2018.

Simon Gordon, Senior Director – Fund & Corporate, looks at some of the recommendations published this year.


Diversity, ESG and PIRC

Every year, Pensions & Investment Research Consultants (PIRC) publishes shareholder voting guidelines designed to encourage governance best practice.

PIRC is the largest provider of corporate governance advisory consultancy services and a lot of their advice is relevant to investors in companies listed on the London Stock Exchange (LSE).

Their update provides guidance on voting recommendations for all proposals that may be brought forward at company general meetings and serves as an important indicator of the general direction of travel in terms of governance best practice.

For 2022 there were several changes, none of which will come as a huge surprise to anyone who keeps an eye on the incremental improvements we try to make to our corporate governance as a society.

For example, there is now more focus on diversity within the Board following the Parker report. If diversity is not clearly demonstrated then PIRC does not recommend re-electing the Chair of the Nomination Committee.

In addition, there is also more emphasis on financial statements being aligned to the Paris Agreement on climate change, as well as reporting standards like SASB and TCFD.

On Director Remuneration, PIRC suggests that Director Pay schemes such as LTIPs may actually present Directors with conflicting sets of duties. They say that it is a fallacy to suggest that these schemes align Directors’ interests with those of shareholders.

However, while it is true that many large institutional investors take PIRC’s advice into account, this is done alongside a number of other factors and so needs to be looked at in a wider governance context.


Controversial recommendation and counterview

Most interesting, and potentially controversial, was the PIRC’s recommended opposition to receipt of the annual report for investments trusts where the fund manager is also providing company secretarial services.

This is not the first time PIRC has made this recommendation as they believe that the interests of the fund manager are in conflict with those of shareholders and the company due to the impact of management fees.

It is important to point out that the Association of Investment Companies (AIC) has always strongly disagreed with PIRC’s position.

The AIC recommends that Boards should continue to appoint the party they deem most suitable to provide company secretarial services, whether that is a part of the management company or an external provider

The AIC have said that they will again try to persuade PIRC that their analysis is flawed.


The solution?

The provision of company secretarial services is a crucial function, requiring specialist knowledge of governance best practice and listing rules in order to provide meaningful, real-time support to the Board.

Many fund managers do not have the scale of company secretarial resource to enable their in-house teams to stay one step ahead of regulatory best practice and change.

Furthermore, from a purely practical point of view, they may not even be able to provide proper support to Boards during periods of staff sickness or holiday leave. Over time more Boards may consider engaging a fully independent company secretary.

Whatever approach is taken, it requires careful planning, strategy and selection of appropriate support.


JTC has over 30 years’ experience in supporting listed funds and structures. We are able to provide a dedicated team of company secretaries to each of our clients, ensuring that proper governance and regulatory advice is always available to the Boards with which we work.

To find out more, please get in touch with Simon directly or find out more about fund services here.

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