Fund managers: stop profiteering, start talking

Fund managers should act as the long-term company owners they are, not just as stockmarket profiteers. It's part of what we stump up their fees for, says Merryn Somerset Webb.

I spend a lot of time talking to fund managers about the way they engage with the companies in which they invest. They all tell me the same thing: corporate engagement is very important. Vital, even.

They can only make long term investments on our behalf if they know and trust the management and if they have faith in the management's corporate governance. So they spend a lot of time meeting, talking, engaging

I like to think that this is more true now than it was, say, ten years ago and that we are at the beginning of a period in which we can rely on the biggest of the fund management groups to act more as the long-term company owners they are, rather than just as stockmarket profiteers. So I was disappointed to read a letter to the FT from Duncan Reed of Condign Board Consulting this week.

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In it, he claims that "one of the most common complaints from boards and their directors is that invitations to meet or at least speak to shareholders commonly go ignored or at the very best there is a tiny take-up rate. The overtures of chairmen and senior independent directors are spurned, let alone those of rank and file non-executive directors."

When crisis hits, big shareholders trip over themselves to make contact (usually about remuneration or M&A) but "for real stewardship to be exercised, these shareholders should ideally be investing their time, as well as their money", not just when warning lights are flashing, but "over the long term".

Reed is of course entirely right and of course it is that long-term stewardship that is part of what we think we are paying for when we stump up the fees for active fund management.

Fund managers, it really is time to raise your game.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.