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Heptagon Capital Brings Two Global Equity Strategies to UCITS Investors

Heptagon Capital aumenta su oferta UCITS con dos nuevos fondos de renta variable — Photo: Dirtsc. Heptagon Capital Brings Two Global Equity Strategies to UCITS Investors

Heptagon Capital, the London-based investment management firm with $8.4bn assets under management, has just launched two new Global Equity funds on its Irish UCITS platform: the Oppenheimer Global Focus Equity Fund and the Kopernik Global All-Cap Equity Fund. This takes the number of funds on Heptagon’s $2.8bn AUM UCITS platform to five.

The Oppenheimer Global Focus Equity strategy is now available to professional UCITS investors. The strategy combines a thematic approach to idea generation with fundamental company analysis. Randall (Randy) Dishmon, the portfolio manager based in New York, started the strategy in October 2007. He looks for durable businesses, regardless of where they are located, with sustainable structural tailwinds and good economics. Entry points are critical; Randy seeks to buy when there is a large gap between market price and what the company is worth to an informed buyer. The investment horizon of 3-5 years is sufficiently long to allow real value to materialize. Although this is a high-conviction, actively-managed, benchmark-agnostic strategy (with an ‘Active Share’ of 96%), its risk profile is limited by the portfolio manager’s focus on price. Randy is an employee of OFI Global Asset Management, a wholly owned subsidiary of OppenheimerFunds, Inc.

The success of Randy’s approach can be seen by the recent ‘Best-in-Class’ award for his Oppenheimer Global Value Fund (GLVYX) Y shares at the 2013 Lipper Fund Awards in the US, beating the 75 other funds in his category. His strategy has continued its outperformance, and for the five-year period ended 12/31/13, Randy has achieved a 5 year annualised return of 28.33%, compared to 14.9% for the MSCI all country world equity benchmark.

The other fund that was launched is the actively managed Kopernik Global All-Cap Equity Fund, and its investment portfolio is being managed by Dave Iben of Kopernik Global Investors, LLC in Tampa, Florida. The strategy pursues a truly global, bottom-up, research driven, fundamental evaluation approach that focusses on identifying market inefficiencies through independent analysis. Dave and his team look for undervalued and unloved stocks that will significantly reward the long term, patient investor, who truly understands a company’s business, and where more normal, stable valuations for a business will eventually be achieved.

Commenting on the new fund launches, Tarek Mooro, Managing Partner and CEO of Heptagon noted: “We are extremely pleased to have brought two such high quality investment managers to the UCITS market. In line with our philosophy of identifying high-conviction, benchmark agnostic, outperforming managers, we feel very confident that these funds will significantly reward stakeholders over the coming years.”

Heptagon Capital LLP is based in London’s Mayfair and was founded in 2005 by former Morgan Stanleydirectors, including Tarek Mooro, Eran Ben-Zour and Fredrik Plyhr. Heptagon caters to institutional and Ultra High Net Worth investors, providing them with creative, class-leading investment ideas and risk management, across traditional and alternative asset classes.

Carrying the Torch for Retirement Security

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Manteniendo la llama olímpica de la seguridad para el retiro — David Wise wins gold in halfpipe in Sochi. Photo: Sochi 2014. Carrying the Torch for Retirement Security

I love everything about the Olympics, in particular what it showcases – sportsmanship, patriotism, and uncompromising dedication.

I can’t help being inspired by the countless examples of focus, endurance and strength. To me, the Olympics stretch the boundaries of what is possible. There is real human emotion, with the margin of victory often measured in hundredths of a second. Many of the athletes prepare for the better part of their lifetime for events that last just minutes, or less.

In stark contrast to the preparation of these Olympians, most workers dedicate little if any time to planning for retirement – an event that could last 20, 30 even 40 years. According to the Employee Benefits Research Institute, less than 2 percent of U.S. workers identify retirement planning as their most pressing financial issue, and 43 percent of workers reported that neither they nor their spouse are currently saving for retirement.[1]

I’m not saying that building a secure retirement is easy. It too requires discipline. Some of that discipline must come from within, as individuals shift some of their passion for spending to a passion for saving. Fortunately, some of that discipline can be automated, through participation in an employer-sponsored retirement plan such as a 401(k) account, with savings made automatically though payroll deduction.

In many ways, the keys to a secure retirement parallel the keys to success for Olympic athletes. Like athletes, savers must set goals, develop a game plan, make a long-term commitment and take action.

One of the winter Olympic sports I find most fascinating is the ski jump, because of the courage, control and composure it must take to ski down a hill at speeds in excess of 50 miles per hour, not to mention the part about flying through the air the length of a football field, then landing.

2014 marks the first time women will compete in this event. Just before year end, Jessica Jerome, age 26, became the first to win the U.S. Olympic Trials in women’s ski jumping. She didn’t decide at age 25 she wanted to be an Olympic ski jumper, this is something she’s been doing since she was 7 years old. And I guarantee her first jump was not off a 70 meter hill.

Her Olympic berth is nearly 20 years in the making. Secure retirements can take twice that long, but don’t demand anything near the intensity of effort. In building a retirement nest egg, starting early is key, but slow and steady wins the race. Saving just $5 per day, 365 days a year, for 40 years, translates into more than $500,000 in savings; at $10 per day you enter retirement a millionaire[2].

Perhaps what I love the best about the Olympics is that for most athletes, the journey started as a far-off and seemingly unattainable dream. There’s an opportunity for workers around the world to take inspiration from this, spending just a little more time defining what their medal-winning retirement would look like, and putting a plan into action to turn those dreams into reality.

[1] 2013 Retirement Confidence Survey, Employee Benefits Research Institute, March 2013.

[2] Assumes 8 percent annual growth. This compares to historical annual returns for the S&P 500 of 11.3 percent from 1964 to 2013, and 9.1 percent from 2004 to 2013, source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html.

Dan Houston, President – Retirement, Insurance & Financial Services, the Principal Financial Group

Encore Capital Group Takes Controlling Stake in Refinancia and Enters in Latam

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La estadounidense Encore Capital entra en Latam a través de la colombiana Refinancia — Photo: Alvesgaspar. Encore Capital Group Takes Controlling Stake in Refinancia and Enters in Latam

Encore Capital Group, an international specialty finance company, has announced that it has taken a controlling stake in Refinancia, a leading debt purchaser in Colombia and Peru. Encore purchased 51 percent of the company in December 2013.

Encore’s acquisition of Refinancia establishes Encore’s presence in the high-growth Colombian and Peruvian markets, which together have nearly 80 million residents. Refinancia services distressed consumer debt, which it either purchases or services on behalf of others. It also offers merchant guarantee services, factoring arrangements, and a small credit card business in Colombia.

According to Ken Vecchione, Chief Executive Officer of Encore, the acquisition continues Encore’s purposeful expansion designed to capitalize on growth and consolidation opportunities both domestically and internationally. “This transaction opens up two new markets in which Encore can deploy capital at higher returns than are available in the U.S.,” he said. “In addition, Encore now has a beachhead in Latin America from which to expand, both geographically and into new specialty financial products designed for underserved consumers.”

Encore will bring to Refinancia its analytic strength, operational sophistication and deep knowledge of distressed consumers, creating opportunities for Refinancia to increase operating efficiencies and strengthen performance. Refinancia also shares Encore’s commitment to fair and ethical treatment of consumers.

Kenneth Mendiwelson, Chief Executive Officer of Refinancia, said, “We are excited to join Encore and gain the financial and operational support of a world leader. In turn, Refinancia provides Encore with immediate access to emerging markets in Peru and Colombia, and positions Encore for growth throughout the Latin American region. We look forward to working together to reach new levels of success.”

According to Vecchione, Encore has been deploying capital through Refinancia since late 2012 and plans to continue this activity. “We are taking the same approach with Refinancia that we took with Cabot, in which we acquire a controlling interest in the company with the expectation of increasing our ownership interest over time. In the meantime, the majority of the capital we invest is staying within the business to fund future growth.”

“We Build a Portfolio Based on Conviction Rather than Benchmark Weight”

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Aberdeen’s high yield team gives a brief overview of its investment process.

What is your investment process?

We are long-term buy and hold investors, not short-term traders. We look at the risks and strength of the underlying creditor protection and side-step complex instruments we do not understand. We look to avoid sectors that experience long-term structural decline, such as IT or technology companies, we prefer industries with a more mature profile. We build a portfolio based on conviction rather than benchmark weight but with enough diversification to limit the impact of defaults.

Meeting with company management is also important and in this regard we typically favor those with experience navigating through a full business cycle.

How do you choose which issues to invest in?

If we like a company then we look at the range of issues available in which to invest and on a valuation basis we decide which deals offer us the best opportunity. When we invest in senior or subordinated debt we look for certain capital structures.

For senior debt we look at bonds with a ratio of 1 to 4 times leverage and for a subordinated bond it is a ratio of 4 to 6 times leverage. When the market sells off senior debt becomes cheaper therefore allowing us to buy bonds relatively cheap while reaching our yield target. We regard non-index issues as a key part of our investment strategy.

This unconstrained approach allows us to benefit from yield pick up from some non- benchmark issues.

Do rating agencies influence your investment decisions?

While we are actively aware of company ratings and any potential hurdles that get highlighted by the agencies, we are not actively concerned as we conduct our own bottom-up research before choosing to invest. Our process is fundamentally driven, meaning that we carry out our own analysis in order to generate a much deeper financial understanding of a company. For example we occasionally find value in CCC rated bonds, yet just because the rating agency has given this bond a rating that reflects a high degree of risk it doesn’t necessarily reflect its true value. We will speak to the agency if they choose to upgrade or downgrade a bond we own and we may potentially view these actions as a trigger point to buy.

What experience does your team have in high yield?

Aberdeen has considerable expertise in this market, having managed a dedicated high yield portfolio for over 13 years. Our knowledge in this asset class is extensive, with over 50 years dedicated experience in high yield bond markets.

MFS International Team Hosts a Dinner With Chief Investment Strategist James Swanson in Miami

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James Swanson, estratega jefe de MFS Investment Management. Tres focos de preocupación para 2014 y todos conciernen al crédito

MFS International Team of  Jose Corena, Managing Director,  and  Paul Brito, Associate Director, are hosting a dinner in Miami the 18^th of March with Jim Swanson, MFS Chief Investment Strategist.

The event, by invitation only, will gather the investment professional community in Miami. James Swanson will offer his perspective on the global markets and what MFS is doing to pursue the best opportunities for investors today.

James Swanson, CFA, is an investment officer and chief investment strategist of MFS Investment Management. He is also a fixed-income portfolio manager. He is a frequent guest commentator on the markets on CNBC, Fox Business and Bloomberg Television and is often quoted in leading national and financial publications, including The Wall Street Journal, The New York Times, the Los Angeles Times and Investor’s Business Daily.

For more information on the diner, which will take place in Capital Grille, 444 Brickell Avenue, please contact Juan Garcia, at  jugarcia@mfs.com or  call 1-800-738-3669, x54195.

Was The Last Decade Too Kind to Emerging Markets?

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¿Fue la última década demasiado amable con los mercados emergentes? — Photo: Alvesgaspar. Was The Last Decade Too Kind to Emerging Markets?

John Stopford, co-head of Investec Asset Management’s multi-asset team, discusses the potential to add emerging market exposure from an income perspective.

The last decade saw a number of key developments which helped emerging markets to deliver exceptionally strong returns. These included the rise of China as a leading economic power, the consequent commodity bull market, the Global Financial Crisis, a surge in capital flows supported by low interest rates and money printing in the developed world which led to a reassessment of the relative risks of emerging market investments.

More recently, the gloss has come off the developing world. Equities, bonds and currencies have all underperformed their developed market counterparts, in some cases dramatically. China has gone from being the main driver of growth to the epicentre of investor’s fears about the sustainability of Emerging Market outperformance. Investor inflows have turned to outflows as growing pessimism has replaced rampant optimism‎.

So, was the last decade a short-lived boom, or do emerging markets represent an enduring investment opportunity?

Emerging market investing was not just a passing fad, but an enduring opportunity, albeit with setbacks along the way

Our belief is firmly the latter.‎ Developing economies are engaged in a multi-generational process of convergence with the developed world. Not all economies will make it, but the progress of the last 25 years has been staggering, and the aspirations of billions of people in a much more open global society seem likely to provide a powerful impetus for further development.

This process has never been a straight line. There have been plenty of crises and setbacks along the way, although encouragingly these have often acted as a spur to necessary reform.‎ It is generally hard to make difficult decisions in good times, but greater challenges have tended to focus the minds of policymakers. The current period is no different. Last year’s plenum in China, for example, puts it on a much more sustainable medium-term footing, even if implementation is not without its challenges. We think similarly, wide-ranging reforms in Mexico bode well for growth and inward investment.

The global environment is likely to be less helpful for emerging markets in the next few years than over the previous decade, but market pricing has already adjusted significantly to reflect this. Yields have risen sharply in bond markets, also equities and currencies have declined, materially, taking many markets to what we think are cheap levels.

In an income context, we see benefits to adding emerging market exposure

In an income context, we see opportunities to add emerging market exposure. Yields on many bonds look increasingly competitive in an absolute sense and on a relative basis against alternatives such as high yield, which appears pretty fully priced. For example, Brazilian three year bonds paying almost 13% price in a pretty downbeat future. Emerging market equities and related securities also offer good opportunities, although pay-out rates make them less compelling in many cases for income-seeking buyers. Global mining stocks, however, are a variant on the theme, with pretty decent yields.

Markets have sold-off to reflect a more challenging environment and now offer attractive yields – but selectivity is required across markets

Some selectivity is required because not all emerging markets and securities are created equal, especially if some of the drivers of the last 10 years have lost their power. We believe, however, that it is better to buy markets when they are less popular and cheap than when they are everyone’s favourite holding. The shift towards pessimism across emerging markets suggests that investors should be looking to add exposure, even if it is too soon to go ‘all in’. In addition, a belief that developed economies can decouple from problems in the developing world are probably almost as misplaced as they were the other way around.

The MFA Introduces Online Hedge Fund Glossary

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Terminología hedge fund de la A a la Z — Photo: Tungsten. The MFA Introduces Online Hedge Fund Glossary

Managed Funds Association, the global trade association representing the hedge fund and managed futures industry, has announced the launch of a comprehensive online hedge fund glossary in collaboration with Latham & Watkins LLP through its Book of Jargon® – Hedge Funds. This resource, available on MFA’s website, provides users with a complete set of key terms, phrases, and definitions specific to all aspects of the global hedge fund industry.

The new hedge fund glossary on MFA’s website offers users access to an interactive library of more than 900 terms, including acronyms regularly used to describe key industry terms, as well as jargon adopted by professionals in the hedge fund industry. The Book of Jargon® – Hedge Funds is also available as a free app that allows users to access the information on Apple’s iPhone and iPad devices. The hedge fund glossary is a meaningful addition to MFA’s full complement of educational offerings for the public, investor, and fund manager communities. These resources include MFA’s online video series on hedge fund basics, educational presentations and infographics, as well as a comment letter database detailing the industry’s position on regulatory matters affecting financial markets participants.

“The launch of the hedge fund glossary further exemplifies MFA’s commitment to educational offerings for hedge fund professionals and serves as another helpful resource for those looking to learn more about how our industry functions,” said Richard Baker, MFA President and CEO of the Managed Funds Association. “These global businesses can be complex, but we believe our glossary allows those who are curious and interested in hedge funds to gain clarity on the basic elements, strategies, and terms that govern the day-to-day operations of the industry,” Baker said.

“We are pleased to collaborate with the MFA on this project to make our Book of Jargon® – Hedge Funds available on the MFA website. We are delighted to support the MFA’s endeavor to provide the hedge fund community with educational resources,” said Steve Wink, corporate partner and co-chair of Latham & Watkins’ Hedge Fund Task Force.

“Covering deal terms from ‘A/B Exchange’ to ‘VWAP’ and more than 900 terms in between, we’re pleased to provide MFA’s members and the wider financial community with this interactive library of the A’s – Z’s of hedge fund jargon,” said Christopher Clark, litigation partner and co-chair of Latham & Watkins’ Hedge Fund Task Force.

Content in the glossary will be regularly updated by Latham & Watkins to reflect changes in legislation, terminology, and definitions that are relevant to the global hedge fund community. The full glossary is available online here, and Latham & Watkins’ Book of Jargon® – Hedge Funds app is available for free from the iTunes App Store here.

Myth Busting: Women Investors Lean Toward Loyalty to Financial Advisors

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Derribando mitos sobre la relación cliente mujer y asesor financiero — Wikimedia CommonsPhoto: Ricardo Carreon. Myth Busting: Women Investors Lean Toward Loyalty to Financial Advisors

Russell’s recently released report “What Really Matters to Women Investors” goes a long way toward debunking any perception that women lack loyalty to their financial advisors. An earlier industry study found that 70 percent of women investors would fire their advisors within a year if their spouses were to die. In contrast, a separate study released by Russell in January 2014 finds that a sweeping majority of women indicate they would stick with their current advisor in such a scenario.

Russell surveyed more than 300 financial advisors and more than 900 women investors working with financial advisors, focusing on two generations of women: Gen X (ages 32 to 47) and the Silent Generation (ages 67 to 80). Results show that 78% of Gen X women and 93% of Silent Generation women would stay loyal to their advisors if they became widowed.

While the research shows that women investors have a propensity toward loyalty to their financial advisors, it also emphasizes the need for advisors to earn this loyalty by aligning their professional capabilities with specific financial planning needs and service approaches. Not surprisingly, advisors can deepen loyalties within their client base by catering to specific values that rank highest in priority among women investors in these two age brackets. Russell’s study provides fresh insight into the priorities and service needs of these women investors.

Both advisors and women investors can benefit by better understanding each others’ capabilities, preferences and needs. Undoubtedly, women are an attractive target client segment for financial advisors given their growing economic power. But beyond this, they can be great clients, because they are predisposed to take a longer-term perspective, are assuming greater responsibility for investing decisions and value tailored advice and guidance from a financial advisor. What’s more, it is clear that when they feel they are being heard and are on track to their investment goals, they are loyal clients who will often actively refer their advisors to family and friends.

Ampliar

It’s worth noting that the improved economic climate since 2008 may play a role in the shifting results of such research. But it’s also possible that advisors have been appealing more to the needs of their female clients as more women have taken on the responsibility of investing.

More than half of women surveyed (52% of Gen X and 63% of Silent Generation) share the responsibility for managing the financial aspects of a household (savings and investments). In marriages and partnerships in which one person bears the brunt of the financial responsibility, that person is usually a woman, according to the study. Nearly one third (29%) of Gen X women and a quarter (24%) of Silent Generation women have more financial responsibility than a spouse or partner. Less than a quarter of women (19% of Gen X and 14% of Silent Generation) say their partner has more responsibility.

Advisors should focus less on budgeting, more on long-term planning

While 74% of advisors say they help develop spending guidelines and budgets for their clients, many women indicate this is not a primary need. Some 77% of Gen X women and 81% of Silent Generation women say they’re comfortable managing their own day-to-day finances.

The same research suggests that women investors are inclined to focus on long-term financial planning issues, such as healthcare, long-term care, and maintaining their lifestyle during retirement. Among advisors surveyed, 56% believe their female clients have a longer-term perspective when it comes to financial planning, while only 5% say male clients take a longer-term view.

Advisors would do well to build up active listening skills

For women investors, constructive communication ranks as the most essential characteristic in the advisory relationship. Some 86% of Gen X women and 87% of Silent Generation women say it’s important that advisors show they are actively listening.

Many women also cite clear communication as vital to such working relationships. A large majority (82% of Gen X and 83% of Silent Generation) of women say it’s important that an advisor adapts explanations to their level of investment knowledge. These women also appreciate advisors who encourage them to take an active interest in their investments. Some 80% of Gen X women and 70% of Silent Generation women want an advisor who explains how decisions might affect them and a partner differently in the future.

Clearly, listening skills and the ability to consider client input are especially essential for advisors interested in cultivating a lasting relationship with women investors.

High responsibility with a confidence gap

Despite the balance of financial management in households, women also acknowledge a lack of confidence when it comes to knowledge of investments and the investment process. More than half (52%) of Gen X women and more than a third (35%) of Silent Generation women indicate they have little or no knowledge about investments.

Since the vast majority of women will find themselves managing financial matters on their own during their lifetimes, women investors represent an opportunity for advisors who can help them build their knowledge, develop strong financial plans and increase their confidence.

Advisor must nurture client relationships

Relationships are important to women. A large percentage of women surveyed (83% of Gen X and 81% of Silent Generation) want an advisor who provides a personal level of service. Personalized notes and birthday reminders, for example, are great ways to make a client feel valued.

Advisors would also benefit from remembering milestones and details about their clients’ family lives. This is important not only to building a relationship but also for the purpose of tailoring financial planning advice.

Ampliar

Download the full research report here.

BNY Mellon Appoints Imad Abukhlal as Head of Middle East and Africa for Investment Management

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BNY Mellon has announced the appointment of Imad Abukhlal as Head of Middle East and Africa of BNY Mellon Investment Management EMEA Limited. In this role, Abukhlal has responsibility for the development and management of all business capabilities across the region. Based in Dubai, Abukhlal reports to PeterPaul Pardi, CEO of Asset Management EMEA and Global Head of Distribution at BNY Mellon Investment Management.

Joining from Western Asset Management (WAMCO), Abukhlal has over 18 years of experience as an investment manager and was most recently Senior Executive Officer and Head of the Dubai office. He was responsible for distribution, client service, and marketing for Middle East, Africa, and Central Asia. Between 2000 and 2008 he established the firm’s Middle East business.

Abukhlal brings extensive experience having also worked at Lyras Financial Services, a multi-family office, as an analyst and portfolio manager focused on investing across various asset classes including fixed income, equities, and currencies.

Pardi commented on the appointment: “Imad joins us with a wealth of relevant experience and is highly respected; we are confident he will add valuable skills and resource and be an excellent addition to the existing team. In addition to the expanded geographical coverage and institutional clients, Abukhlal is also responsible for building out additional client segments as well as heading up the region’s investment management team”.

Abukhlal holds a bachelor degree in Mechanical Engineering from Westminster University, an Msc in Ocean Engineering from University College London and an Msc in Shipping Trade and Finance from Cass Business School.

Pension-Fund Governance, Proxy Adviser Debate, and More

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Apuntes sobre Gobierno Corporativo: Gobierno de Fondos de Pensiones, Debate sobre el Proxy Adviser, y más — Wikimedia CommonsPhoto: CEAC_Uchile, Flickr, Creative Commons.. Pension-Fund Governance, Proxy Adviser Debate, and More

From the reemergence of pension-fund governance in Australia and the Canadian government’s launch of a public consultation on the Canada Business Corporations Act to a new reporting framework from the International Integrated Reporting Council and continuing proxy adviser debate in the U.S., it’s time to span the corporate governance globe to review important developments from the month of December.

Australia

The new Australian coalition government has announced plans to revisit pension-fund governance through a recently posted discussion paper. The consultation will revisit extensive reforms of Australia’s 2009–10 Superannuation System (or Cooper Review) that resulted in changes to superannuation obligating directors of trustee companies to properly manage a fund and ensure the trustee acts in the best interest of beneficiaries. Chief among the issues being revisited is the structure of pension-fund boards. Currently about half of pension-fund board members are employee representatives; the other half being employer representatives. The proposed reforms would allow for a more independent board structure. The closing date for comments is 12 February 2014.

Canada

In December the Canadian government launched a public consultation on the Canada Business Corporations Act (CBCA). The consultation includes consideration for mandatory majority voting for directors and mandatory say-on-pay ballots for large Canadian issuers.

Issues that have been identified for review as part of the consultation process include:

greater transparency of the ownership of corporations to help ensure that they are not used for tax evasion, money laundering, or terrorist financing
the adequacy of corporate governance legislation in preventing bribery and corruption
the diversity of corporate board members and management teams
rules for takeover bids
the use of the CBCA’s arrangement provisions to restructure insolvent businesses
the role of corporate social responsibility

Comments are due by 11 March 2014.

United Kingdom

The Collective Engagement Working Group, a group of asset managers and owners, recently announced the launch of an investor forum to facilitate collective engagement in U.K. companies. The group is scheduled to become operational in June 2014 and is intended to facilitate collaboration among a wider range of investors both from the U.K. and internationally. The idea for the forum grew out of the Kay Review, and the main objective of the forum is to build trust among institutional investors and promote a culture of long-term strategic vision and wealth creation over time. The forum will operate engagement action groups to address and resolve issues of concern where existing engagement has failed.

United States

It seems that proxy advisers were in the sights of regulators and issuers an awful lot in 2013.

Issuers have long complained about conflicts of interest that may arise when a proxy adviser provides services to both investors and corporate issuers on the same governance issues. Regulators and proxy advisers in a number of jurisdictions are looking into the issue, with increased transparency being the most likely short-term outcome.

In Canada, a review of proxy advisers by Canadian Securities administrators is likely to result in a voluntary set of best practices.

In Europe, that scenario has already played out following the European Securities and Markets Authority (ESMA) consultation regarding the proxy advisory industry in Europe. An industry group of international proxy advisers has been tasked with developing a set of Best Practice Principles for Governance Research Providers. The principles are designed to govern how signatories to the principles interact with other market participants on a comply-or-explain basis. You can also read the CFA Institute comment letter on the principles.

In the U.S., all sides in the proxy advisor debate were on display at an SEC-sponsored meeting on 5 December. You may not have the time to watch all four hours of the discussion, but the meeting is a good primer on where things stand in the proxy advisory issue in the U.S. Whether the result of all this talk is regulation (doubtful) or a universal adoption of a global code of best practice, like the code coming out of Europe (more likely), expect scrutiny of the industry in the year to come. If such increased attention results in more transparency and accountability of the proxy advisory industry, that’s not such a bad thing.

International

A three-month consultation ended in December with the release of a new reporting framework from the International Integrated Reporting Council. The newest version of the framework provides more information on governance than previous iterations. According to the current framework, “An integrated report should answer the question: How does the organization’s governance structure support its ability to create value in the short, medium, and long term?” See our recent interview with Paul Druckman, CEO of the International Integrated Reporting Council, on what integrated reporting means for investors.

Article by Matt Orsagh, CFA, CIPM, Director of Capital Market Policies at CFA Institute. First Published on January 6^th, 2014, at Market Integrity Insights, CFA Institute.