Investors demand more from their fund managers

24 February 2016

Editor

EU regulation

Institutional investors are demanding high ethical standards from their investment managers and all investors are looking better transparency about fees they charge according to, From Trust to Loyalty: A Global Survey of What Investors Want, produced for the CFA Institute.

Institutional investors, with their complex constituencies and a clear focus on risk management, hold their investment managers to the highest ethical standards, according to the CFA Institute. The survey found that 72% of respondents believed that the most important attribute of a firm is that it “acts in an ethical manner in all our interactions”. This high level of ethical commitment is also demonstrated by having adopted a recognised code of conduct for the industry and never having had regulatory or compliance violations (both important to 68% of respondents).

The CFA Institute survey also found that institutional investors increasingly want more than an investment manager - they want a partner who can address their investment concerns. The survey shows that institutional investors also want to know their investment manager deeply understands their business and priorities, but this is an area, the poll found, where managers are not meeting the expectations of their clients.

There is a mismatch with the service provided by fund managers and their expectations. Investors, the survey found, want a firm that “takes time to understand my organisation’s priorities, liability structure, and political dynamics with different stakeholders” (important to 65%, but only 42% say the industry is delivering it) and “acts as a partner in problem solving and goes beyond a specific mandate to lend insight on our investment concerns” (important to 62%, and only 39% are satisfied).

For many investors, understanding fees – how much they are paying and what they are paying for – ranks above returns in their priorities. Similarly, institutional investors aren’t getting the proactive communication they want. This is expected by 59% of institutional investors, but only 41% are satisfied with what they receive in this regard.

For institutional and retail investors alike, the top operational priority is having reliable security measures to protect data. Investment firms must employ measures to ensure that only they and their staff have access to investors’ personal and financial information. There’s perhaps no greater headline risk to an investment manager or its clients than a data breach. Forty-five percent of institutional investors would leave their current investment firm if confidential information were to be compromised.

The CFA Institute Trust to Loyalty Survey polled 3,312 retail investors and 502 institutional investors in North America, Europe, Asia, and Australia. The survey was conducted online from 19 October to 11 November 2015 and produced by Edelman Berland.

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