* Fund firms see assets under advice nearly double
* Strong interest from pension fund clients after crisis
* Investors keen to engage as good owners
By Raji Menon
LONDON, June 25 Fund firms offering shareholder
engagement services have seen assets spike over the past year on
soaring pension fund demand for increased scrutiny of company
boards, fund managers said.
These services liaise with companies to improve long-term
business performance based on good governance principles and aim
to counter perceptions that investors have given companies too
much of a free ride.
Hermes EOS, the shareholder engagement service owned by the
BT Pension Scheme (BT.L), has seen an almost 50 percent rise in
clients since 2009, with assets under advice jumping to 65
billion pounds ($97 billion) from around 40 billion last year.
"We are definitely seeing much more interest in these
services," Hermes Chief Executive Rupert Clarke told Reuters.
"With the upset and turmoil in the financial markets and
with some of the questions over the behaviour of banks and with
behaviour of shareholders in quoted companies, more and more
long-term investors are establishing how they can best be seen
to be engaging their assets as good long-term owners."
British fund firm F&C FCAM.L said it has also seen strong
interest in its responsible engagement overlay (Reo) service,
while British boutique firm Governance for Owners (GO) said
clients in its voting and engagement service had more than
Offerings like EOS and Reo allow end-investors effectively
to outsource the in-depth oversight of corporate governance and
address concerns sparked by their perceived docility before and
during the credit crisis.
"The examination of shareholder oversight of boards in the
aftermath of the global financial crisis showed that investors
did not do enough in scrutinising boards and management," said
Simon Wong, managing director at GO.
"That has led to initiatives such as the Stewardship Code in
the UK which in turn has brought about a greater interest in
engagement," he said.
The Stewardship Code, due to be published shortly, is the
official code of investor rules in Britain.
Colin Melvin, chief executive of Hermes EOS, said the
service was seeing strong interest from British corporate
schemes. It currently offers the service to Royal Dutch Shell
(RDSa.L) both in Britain and the Netherlands and BAE (BAES.L).
He added that EOS had just added its twentieth client - the
Australian super fund for health and community workers, Hesta.
F&C said strong investor demand for its Reo service from
pension funds after the crisis had seen its assets under advice
for third parties jump from 37.1 billion pounds at the end June
2009 to around 56.4 billion now.
"The financial crisis was certainly a trigger as is the fact
that the spotlight for fiduciary responsibility for long-term
stewardship is falling firmly on pension funds and their
trustees," said George Dallas, F&C's director of corporate
"Given the fact that the social, ethical, environmental and
governance issues that we engage companies on focus on long-term
issues, many of our clients are recognising that this is one way
that they can exert their rights as investors to ensure that
companies appropriately address these longer-term risks."
(Editing by Michael Shields)
($1 = 0.6680 pound)