Investor engagement: Why voting technology is the key
Author: Charlie Barlow, VP Fund Manager Partnerships, Tumelo
A cynic would claim that the only thing that matters to fund managers is their Assets Under Management (AUM). And on paper, one could be convinced that this is true. AUM determines a manager's fee income, and can tangibly impact a fund's influence during corporate engagements.
But recent developments have now brought to the forefront a tool which fund managers have always had, but has often been overlooked: investor engagement.
The time for investor engagement is now
Meaningful investor engagement is a key aspect of responsible stewardship, and can range from maintaining constant dialogue with investors, to offering vote policies that reflect investors' priorities. But it is much more than posting a fund's voting direction on its website and sharing an asset management firm's annual Stewardship Report.
In the UK, recent regulation has directed increasing attention towards managers' stewardship of asset owners' proxy votes. This began with the introduction of the PLSA Implementation Statement in 2019, and was subsequently bolstered by further guidance such as:
The Financial Reporting Council's (FRC) UK Stewardship Code in 2020.
The 2021 report on beneficiaries' sustainability preferences published by the UN Principles for Responsible Investment.
The 2021 report released by the DWP Voting Taskforce, which recommended fund managers offer pooled fund investors the opportunity "to set expressions of wish on request".
A similar movement can be seen across the Atlantic, where the proposed INDEX Act in the US is advocating for managers of passive funds to delegate voting decisions to their clients.
Investor-manager alignment has never been more important, with disparate investor views in the US already hurting fund managers' AUM. And while the billions of dollars withdrawn from BlackRock by conservative US states may not be a total catastrophe for the big asset manager, it is a clear signal that the industry must improve its engagement practices.
Voting technology: the way forward
For fund managers, the overarching question posed by the above regulations and industry movements would be: How do I obtain the voting preferences of my clients? This would not only unlock better engagement by empowering managers' clients to participate in the stewardship of their assets, but also ensure managers fall on the right side of regulation.
As is the case for most problems, technology is very easily the answer. Voting solutions that allow investors in pooled funds to vote their assets are already on the market. They work by identifying the relevant asset owners in a pooled fund, verifying that those owners have a right to vote, and passing them the voting ballot.
"Pass-through voting" technology allows these investors to directly cast their proxy votes, without any technical hassle for fund managers. It also streamlines communication on issues of stewardship and alignment, as managers can see their clients' voting activity in real-time. This fosters trust between managers and their clients, as a transparent two-way dialogue is but a platform away.
In an increasingly competitive environment, where fund managers are chasing the same AUM, engagement with investors has never been more important.
Tumelo is a pioneering fintech business that is helping fund managers drive deeper, real-time transparency and engagement between fund managers and their investors. Offering a solution for both retail and institutional investors, Tumelo partners with fund managers to provide a tool for investors to either vote their own shares or indicate how they would like their fund managers to vote on AGM proxies.
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