Financial News

  • 11 April 2014, 13:46

Fund Managers Gain New Voice With ABI Merger

The UK's 1.8trn fund management industry is to gain a powerful new voice in its engagement with major listed companies through the merger of parts of two of the City's leading trade organisations.

Sky News can reveal that the investment affairs division of the Association of British Insurers (ABI) is to merge with the Investment Management Association (IMA) to create a focal point for asset managers to act as the stewards of one of the world's largest pools of capital.

Insiders said that the move would represent one of the most significant changes to the City's interactions with listed companies for at least 20 years.

An in-principle agreement to a merger, which had been ratified by the boards of the two bodies in recent days, would be announced on Friday, they said.

"You don't want to fire small arrows; you want to fire big bazookas at big targets," said a person close to the situation.

The ABI will continue to represent companies on issues affecting the insurance industry, but its Institutional Voting Information Service (IVIS), which provides advice to fund managers on how to exercise votes at company meetings, will transfer to the newly merged body.

Daniel Godfrey, the IMA's chief executive, will head the new organisation, which will be given an as-yet undecided name.

It will also have a new chairman, replacing Dougie Ferrans, the IMA's chair, who had already said that he would step down this year.

In total, around a dozen people will move from the ABI to the IMA's new incarnation.

Robert Hingley, the ABI's director of investment affairs, is expected to move across to help oversee the transition in a consultancy role before leaving to explore opportunities elsewhere.

The changes are aimed at addressing a number of issues, including the perception that the influence of ABI members over the affairs of major public companies has waned in proportion to their diminishing ownership.

A much higher volume of shares in the London stock market are now held by hedge funds and other investors, frequently making it more difficult for more traditional fund managers to make their voices heard on issues of governance, pay and stewardship.

New rules to give investors a more potent say on boardroom pay have recently been introduced by Vince Cable, the Business Secretary, in the wake of the 2012 'shareholder spring' which unseated bosses at companies including Aviva and Trinity Mirror.

BP was criticised over pay policies by Standard Life Investments at its annual meeting on Thursday, while Barclays is expected to see a significant number of shareholders voting against its remuneration report in a fortnight's time.

The ABI's investment affairs committee, which is chaired by Robert Talbut, a leading fund manager, is likely to be reborn in a slightly different guise under the new body.

The merger talks between the ABI and the IMA have been taking place for several months, with both sides increasingly keen to avoid the duplication which sometimes occurs between the work undertaken by the two bodies.

Tidjane Thiam, the chief executive of Prudential who also chairs the ABI, is also said by City sources to have been keen on the merger to create a clearer focus for the ABI as a body representing the interests of the insurance industry.

"The combination will allow the asset management industry to cover the entire waterfront of matters which are of interest to fund managers from a single perspective," said one source.

The ABI already has a full in-tray thanks to changes announced in last month's Budget affecting the annuities sector, as well as the devastating recent flooding across parts of the UK.

The Financial Conduct Authority has also unveiled an inquiry into certain parts of the life insurance industry in a manner which sparked fury from the ABI and prompted an independent probe into the City watchdog's conduct.

People familiar with the talks played down the suggestion that the ABI would lose out by ceding its investment affairs unit to the IMA.

"The ABI is gaining a son rather than losing a daughter," said one.

One fund manager said that it had become difficult for the ABI to take robust positions about the governance and stewardship of companies which were themselves members of the body, a conflict which may be less visible at the new organisation.

The ABI and IMA are understood to have set a target date of June 30 for the completion of the merger.

They have separately endorsed the establishment of an Investor Forum, which is aimed at uniting shareholders from around the world to express views about strategy, pay and other areas of corporate stewardship.

Neither the ABI nor the IMA would comment on Thursday.

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