Daniel Godfrey is not one to back down from a challenge.
In the 18 months since he became CEO of the UK’s Investment Management Association (IMA), he has tackled head-on the trade body’s most publicly vocal critics.
One baring some of the sharpest knives was a boutique wealth management firm that accused the IMA of consciously ignoring “hidden” fees. By the end of this year, however, the UK’s regulator—the Financial Conduct Authority—may well have adopted the IMA-proposed model for full cost disclosure into its rules to govern the sector.
“It’s taken longer than I would have liked, but I’ve been told this is lightning pace by trade body standards,” he jokes.
The IMA has now set its sights on a bigger, broader, and more ambitious target—and one which could kick-start a fundamental shift in investment culture.
The Investor Forum
It all comes back to a mantra: “Make investment better.”
“Creating the Investor Forum will make investment better as it will ultimately create a long-term culture,” Daniel Godrey, IMA. While this isn’t the IMA’s official motto (yet), it is a phrase Godfrey reiterates throughout our conversation, which takes place on two green sofas in his London office.
The first step towards this sector improvement has been The Investor Forum, an independent body set up by the IMA to promote better engagement between fund managers and the listed companies in which they take stakes.
The forum is a direct response to the review of equity markets by Professor John Kay in 2012, which highlighted a dangerous tendency to focus on short-term performance. The review criticised the equity market culture of “exit over voice” or taking the money and running at the first sign of problems rather than engaging.
Last month, former Fidelity CIO Simon Fraser was announced as the first chair of the forum and he is joined by Andy Griffiths, currently a senior adviser to private equity firm Corsair Capital, as executive director.
Chief Investment Officer is a little disappointed to note that the first two of the forum’s objectives begin with the word “promoting”, which promises little than adding yet another voice to the long-term investment debate.
However, the third objective, if successful, could really shake things up: “Forming engagement groups to drive constructive change when there is a critical mass of support among forum members that a company is failing in some way that might compromise long-term returns or appropriate accountability of management.”
Or, in plain English: Coming together to tackle a flagging company.
Although founded and supported by the IMA, Godfrey is adamant the Investor Forum has to be independent—particularly as it will be targeting membership from overseas as well as from the UK. It is the first time a UK body has attempted to formalise the process of engaging investors across borders.
“If it is going to embrace other non-members such as sovereign wealth funds and foreign asset managers then it has to be independent,” Godfrey says.
“Creating the Investor Forum will make investment better as it will ultimately create a long-term culture around investment, better long-term, sustainable strategies, and therefore better long-term returns. That’s good for managers, clients, and the economy. We [will have] done that without regulatory pressure.”
And the IMA has recently been handed the tools to help make it work. Earlier this year the body merged with the investment division of the Association of British Insurers (ABI) and brought 14 of its people on board. However, the ABI’s Institutional Voting Information Service is the key to Godfrey’s idea. The system collates governance reports on all companies listed on the FTSE All Share index and provides them to fund managers, saving them a significant amount of legwork.
Other capabilities added by the merger are likely to be crucial to the success of the Investor Forum, and in turn, the IMA’s aim of improving institutional investors’ and general public’s perception of asset managers.
Market efficiency and better IPO processes are also on Godfrey’s radar: “After all, there are frictional costs of being in the market that are borne by the investor,” he says.
A long-term culture shift is a big ask, which is why no one has done it before. Investors in the UK and abroad should watch to see if Godfrey and the IMA can really pull it off—and maybe pitch in to help.