Managers come under corporate culture scrutiny
Frontier has re-rated multiple managers from its investment list after enforcing higher standards for corporate culture.
The firm said events such as claims of sexual harassment at AMP had prompted the firm to extend their focus on corporate culture within its manager recommendations.
This included higher hurdles for managers to clear in areas such as transparency, treatment of staff, evidence of diversity and a lack of systemic behavioural or cultural issues.
Director of sector research, Paul Newfield, said the hurdles had already resulted in some managers being re-rated as a result.
“Unfortunately, we have had to test some managers via that framework already. This has enabled us to rigorously assess key areas where less tangible but critical cultural issues, which are not easily quantifiable, arise,” he said.
“We have already applied this framework to a number of cases where concerns have arisen and in some cases we have re-rated managers, some down sharply, when they have come up short of our expectations and for them that will mean a loss of funds either from existing clients re-allocating or potential investors choosing not to allocate in the first instance.”
However, he added while those quality fund management companies should “have nothing to fear” from the new guidelines if they were operating conscientiously, a failure on culture could be seen as indicative to failures in other parts of the business.
“People should not underestimate the need to properly examine the existence of these traits and the work needed to assess these factors. These traits sit on top of, and are conducive to, the ability of the manager to deliver desired return outcomes,” he said.
“A failure here is likely indicative of imminent failure across other more quantifiable parts of their business.”
AUTHOR
Laura Dew
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