The rollout of coronavirus vaccines has fuelled hopes for some kind of return to normal in 2021 even as the pandemic rages across the world. Persuading employees it is safe to return to offices after many months working from home is just one task facing asset management chiefs.
They must also tackle challenges including responding to climate change, growing investor interest in environmental, social and governance issues, diversity in the aftermath of racial injustice protests and regulatory changes.
These issues are on top of ensuring that the fundamental task of delivering attractive risk-adjusted returns are not neglected at a time when concerns are mounting over the impact of central bank interventions on financial markets.
FTfm asked the CEOs of some leading asset managers about their top priorities for 2021.
Back to the office
Working from home is the new reality for many employees of asset management companies but some CEOs are cautiously optimistic that a return to the office will be possible this year.
“We need to figure out how to return to the office safely once the vaccines have been rolled out while also leveraging the technology that has allowed staff to work productively together during lockdown,” says Tim Buckley, chief executive of Vanguard, the world’s second-largest asset manager.
Coronavirus has led to a cultural shift in attitudes towards working from home among employees and employers, according to Asoka Wöhrmann, the boss of DWS, Germany’s largest asset manager. He welcomes the improvements in work life balance and reductions in carbon pollution that have followed. “Covid has been extremely challenging for many individuals, communities and industries, but it has also helped fast-forward greater acceptance of new ways of working,” says Mr Wöhrmann.
Other CEOs are more concerned about the disadvantages created by remote working.
“People need to interact to generate new ideas and learn from each other. Not only is that good for business, but it is more enjoyable, frankly,” says Chris Merry, CEO of Stonehage Fleming, the multifamily office.
That view is echoed by Ian Simm, chief of Impax Asset Management, who says that short conversations and chance encounters that happen in offices “cement the culture and feel” of a company. “You can’t sustain that if everyone is dispersed in their homes. We are going to be quite cautious about assuming a massive switch to working from home,” he says.
Dean Proctor, the CEO of 7iM, the wealth manager, is also concerned that collaboration has suffered with consequences for new staff members in particular. About 40 new hires have joined 7iM over the past 12 months, accounting for around a tenth of its workforce.
“Delivering the support for new colleagues is not easy. Training, mentoring, brainstorming and providing feedback have been more difficult. There is nothing more helpful than sitting next to an experienced colleague or manager,” says Mr Proctor.
Climate change and ESG
US President Joe Biden’s decision to rejoin the 2015 Paris accord and the delayed COP26 conference in Glasgow this year will push the challenge of tackling climate change to the top of the agenda for governments, regulators and investors.
Mr Simm hopes that countries will deliver credible road maps to demonstrate how their net-zero goals will actually be delivered as part of the COP26 process. He also wants to see more clarity on the contribution of the financial sector to net zero carbon goals.
“Investors should pay close attention to how regulators are responding to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) which is framing how companies and investors alike are reporting in this area,” he says.
Aviva Investors has embarked on a multibillion-pound renewable energy investment drive in an effort to reach net zero carbon emissions across its £47bn real assets platform by 2040.
Newly promoted CEO Mark Versey says asset managers need to “move on from making pledges” to concrete measures to reduce carbon emissions.
The coronavirus pandemic has also exposed deep inequalities in society as the effects of the health crisis and accompanying economic recession have been felt more deeply in minority and socially deprived communities.
Frédéric Janbon, chief executive of BNP Paribas Asset Management, says the pandemic has accelerated the focus on social issues within ESG assessments. “Many social issues are qualitative by their very nature. The main challenge is to access high quality and consistent data to measure them.”
BNP Paribas expects demand for sustainable investment strategies to grow more rapidly after the coronavirus crisis subsides and expects clients to be more stringent assessing the ESG promises made by investment managers.
“Asset managers will distinguish themselves based on the rigour of their ESG policies and processes,” says Mr Jambon.
Protests over racial injustice after the killing of African American George Floyd by US police were followed by a flurry of pledges by asset managers to focus more on diversity and inclusion.
“Too many people have experienced racism first hand and systematic bias. The financial services industry needs to understand the importance of creating a community where everyone feels they belong,” says Mr Wöhrmann. He expects to see stronger efforts to break down the barriers facing minorities working in the investment industry and additional diversity and inclusion initiatives to ensure greater representation of employees of different backgrounds at all levels of business.
Paul Britton, CEO at Capstone, a hedge fund manager, says the UK’s 10,000 Black Interns initiative which has gathered support from 450 companies is evidence of change. “Financial services firms will face increasing pressure to hold themselves accountable in the context of social good. We have to be a catalyst for deeper rooted change,” says Mr Britton.
Regulation is never far from the mind of asset management CEOs and the need for central banks to provide multibillion-dollar support programmes for financial markets during 2020 is expected to be followed by a further examination of the rules by supervisors in the US, Europe and UK.
Mr Janbon says BNP’s analysis indicates the fund industry did not amplify liquidity stresses and therefore remained resilient during the crisis that swept though financial markets early in 2020.
But he also expects to see an increase in supervisory convergence to ensure uniform regulation applies across Europe.
The UK’s split from the EU has prompted European regulators to re-examine the rules covering delegation, a potential threat to the City of London’s role as the most important hub for asset management in Europe.
“Delegation is essential for asset managers to provide the best investment expertise to our clients and to help organise global companies in an efficient way,” says Mr Janbon.