Allowing institutional investors to meet their fiduciary duty
Institutional investors are under increasing pressure from regulators and industry bodies to take a view on the stewardship practices of the funds they use. They are still incredibly price sensitive, but now also need to take into account the vote policies of funds.
But, in the proxy space, today's state of play presents challenges for institutional investors. Especially in cases where their votes are opposing themselves.
How does that happen?
- Scenario 1: The institutional investor uses a segregated mandate as well as pooled funds. The investor is voting their shares in the segregated mandate, whilst the fund manager of the pooled fund could be placing an opposing vote on the same proposals.
- Scenario 2: The institutional investor exclusively invests through pooled funds across various managers. Fund managers can then vote in opposing ways to each other on the same proposals.
Typically, the institutional investor would have set up a segregated mandate to take control of their voting; however, this comes with additional fixed costs, fees and complexity for the fund manager.
Here's a great solution
Tumelo allows the fund manager to pass the vote down to the institutional investor while still accommodating them within a pooled fund structure, delivering a low-cost product that offers the same flexibility as a segregated mandate.
Fund managers can onboard institutional investors by simply sending them a link to the digital platform and asking them to sign up.
What does it look like in practice?
Institutional investors get access to a first-class user experience that allows them to vote directly or set up a voting policy. They can also fulfil all of their reporting requirements from the same platform.
Delivering an exceptional retail-investor experience
Retail investors should have the same rights as other unit holders. If the opportunity for pass-through voting is available to institutional investors, it should be available to retail investors on the same terms.
However, there are challenges whereby funds may be composed of thousands of underlying companies making it an impossible task for the retail investor to vote each proxy manually. Coupled with the information disadvantage that a retail investor has relative to an institutional investor or fund manager, it makes for a challenging experience.
Tumelo solves this challenge by offering the retail investor a selection of vote policies they can set and apply to their shares. Investors have real-time access to upcoming AGMs and the vote direction for their shares, even choosing to override the vote policy recommendation when they disagree.
The other significant challenge is ensuring the vote reaches the retail investor. Due to broker platforms using an omnibus structure at the custodian, the custodian does not know who the retail investors are, only that the broker platform owns X number of shares. The traditional proxy system stops at the custodian meaning the retail investor can't vote.
Tumelo takes a beneficial owner-first approach, directly verifying holdings information with broker platforms, allowing fund managers to pass the vote down to the true beneficial owner, regardless of whether they are a client of a broker platform, IFA or another structure.
Summary
Tumelo allows fund managers to offer pass-through voting on their pooled funds, allowing them to build a low-cost product that provides the same flexibility as a segregated mandate. If you are a fund manager, find out how you can win and retain clients by empowering them to vote with pass-through voting.