The Credit Suisse collapse and why good stewardship matters
The necessary bailout of Credit Suisse has only reiterated the importance of corporate governance, according to portfolio managers at First Sentier Investors.
Speaking at an adviser roadshow in Sydney, Stephen Hayes, global head of real estate securities, noted the collapse of the Swiss banking giant provided insights into what happened under poor management and governance.
“We’ve heard a lot about responsible investing, and you take a step back [here] when you talk about corporate governance — how can we be in this situation today? How could Credit Suisse be in this situation where they didn’t have liquid investments to match their deposits?” he said.
“It’s just poor management, poor corporate governance. That’s the same as what happened with SVB.”
He added: “It’s hard to know whether this is going to be a contagion, systematic risk, or [whether] this will just be put to bed, but it does highlight the importance of corporate governance.”
Research this week by Bank of America found 31% of respondents to its global fund manager survey were concerned about the bank crisis leading to a systemic credit event.
Sujaya Desai, investment analyst at Stewart Investors, said it reminded investors of lessons to be learned from going back through history for examples of bad stewardship.
“This isn’t the first mistake that has happened across the banking system, so if you go back through the history of financial institutions, I think the idea of stewardship really shines through in a moment of crisis,” she observed.
She highlighted the example of HDFC, one of India’s leading housing finance companies in Stewart Investors’ portfolios.
“The three most senior people within the mortgage finance institution have between them a sum total of 153 years of experience at HDFC alone,” Desai said.
“When you’ve got that longevity in management teams, that’s when you see stewardship shining through from having seen multiple cycles time and again, knowing how to react, knowing what to do on the ground.
“Those are things we look for in terms of trying to identify quality people and quality of stewards. Particularly when it’s a financial institution, leverage is so much more meaningful.”
AUTHOR
Rhea Nath
Recommended for you
Women are expected to inherit US$124 trillion through the intergenerational wealth transfer, but Capital Group has found they are twice as likely to rely on social media for advice over a financial adviser.
Challenger Investment Management has raised $350 million during the offer period for its new ASX-listed investment structure.
A week after Lonsec downgraded multiple funds from Metrics Credit Partners, rival research house Zenith Investment Partners has opted to retain its ratings for the same funds.
Strong adviser engagement has helped Praemium reach $1 billion in inflows on its Spectrum offering, with a deal with Western Australian wealth firm Euroz Hartleys expected to add as much as $2 billion.
