192 Managers Under the Spotlight
UK UCIS & UCITS Structures
Its taken the FCA to point out in their June 27th consultation paper that there are 192 Fund Management Companies in the UK who manage Funds without any Independent Corporate Governance to review their practices.
They manage UK UCIS & UCITS which do not have a Board. Then through an internal Board of the Fund Manager (paid for by the investment vehicle) appoint a third party or internal Fund Manager and team to manage the assets. The Fund Management Company deals with the investor.
The FCA are suggesting that over the next 12-18 months that each of the 192 appoint a minimum of two and maybe 3 or 4 Non Executive Directors. This being part of the Board of the Fund Manager will be on the FCA Register. The costs will be passed on to the Funds.
Having spent the last 20 years either being part of managing offshore funds and dealing with their Boards or latterly sitting on offshore Boards it left me flabbergasted. Firstly, how can in this day investors allow such a system to perpetuate? How do they evaluate the value they are receiving from the lack of independent oversight? I have spent many years and meetings evaluating and revaluating how a Fund is managed. How can there be so many institutional investors (this review did not apply to the retail sector) willing to accept such a status quo.
It will be interesting to see how this process works out. How independent will the appointed Non Execs be? Will they just rubber stamp or stand up and be counted in what should be best practice. It can only bring 192 Fund Management Companies into the world similar to Ireland & Luxembourg best practice. It will bring a lot more than just the over view of the Funds but quite likely the culture of the organisations. It should bring in much greater professional oversight which can only be applauded as in the interest of the investor.
In due course should this be extended further say to Managed Account platforms for instance.