The financial crisis was in 2008 and as I’m getting older that seems only very recent. There are probably several of you reading this that were still at school and not working. But believe it or not, as we pass into 2020 these events and serious worldwide ramifications were 12 years ago.
Back in 2008 the banks took the full force of public outrage; the pendulum appears to be swinging and Asset Management is being vilified. Let’s face it, at the time, with general mistrust of banks, bankers and those mysterious institutions called Investment Banks, the public were encouraged to broaden their horizons and think about investing in diversified portfolios and make more use of the mighty brains of well respected and successful Investment Managers. They became the new heroes with promises of better returns over the longer term.
More transparent than the banks, their sworn duty was to invest wisely and return monies to investors with rates better than the market and inflation.
everyone including the Government and Regulator helped instil a confidence in the Asset Management industry which is now feeling the full weight of that responsibility
With their pants proudly worn over their tights, they stepped up to the plate to secure pension monies, savings and rainy day funds, attracted us in and drove us away from the untrustworthy bankers.
Supported by the advice of expert distributors, the public invested with star fund managers into property funds and funds purporting to be actively managed without knowing that the stewardship, oversight and internal challenge in many instances was not there.
I apologise if I seem to be taking the micky but my point which is coming, is to highlight that everyone including the Government and Regulator helped instil a confidence in the Asset Management industry which is now feeling the full weight of that responsibility.
We are now in the new world of the SM&CR and Asset Management Market Study requirements. Both of these are tools the regulator can use to ensure;
- Competence is tested and evidenced (did you know for example there is no requirement for someone who has been managing money since before 2001 to have any formal or professional qualifications?)
- Senior Managers are on the hook for ensuring their Certified individuals are Fit and Proper
- Fund Boards have at least 2 or 25% (whichever is greater) NED representation
- That their next year end fund reports include a “value for money” statement detailing how the funds represents value to investors
Additionally, in the last few months a “Dear Chair” letter was sent out to firms requiring them to assess their liquidity levels and retest their stress testing scenarios for their funds.
The Woodford case, the issue of property fund investing and liquidity in funds more generally, is now a firm focus of both the PRA and FCA. Investors have to accept that with investment comes risk, and a consequence of situations we find ourselves in may be;
- fewer funds
- more wordy explanations of what the fund represents
- potentially more funds moving away from daily dealing
Equally, Asset Managers have to ensure that if they step up to the plate to manage billions of pounds of the public’s hard-earned cash that they truly are doing this in their best interest and managing the conduct risks properly with skill, care and diligence.
It’s not a role for the faint hearted and Asset Managers need to accept that “With great power, comes great responsibility” – Spiderman, 2002
