Hermes welcomes the publication of the FCA’s Asset Management Market Study. The UK is a global leader in asset management, and the industry is an important source of growth in the UK economy. But it needs to change; investors need transparency, responsibility and simplicity.
The FCA has observed that the asset management industry is perhaps unique in that higher competition has not driven down average fees. Hermes believes that instead of focusing on profitability, asset managers must focus on how well they serve savers.
We firmly believe that good governance is a cornerstone of active investing, and are pleased to see that the FCA has placed emphasis on independent fund boards and on acting in the best interests of clients through the Senior Managers Regime. This is a practice we have been observing for a number of years through the Hermes Responsibility team which is accountable for developing and integrating responsibility across the business. Further to this, the Hermes Investment Office is answerable to clients for the investment teams’ consistent delivery of responsible, risk-adjusted performance and adherence to the processes which earned them their ‘kitemarks’. We believe that stewardship is a crucial element of fund management and an opportunity for investment managers to add value to the end investor.
The FCA has observed that, on average, both actively managed and passively managed funds did not outperform their own benchmarks after fees. As an active manager with a high active share of 85%, we believe some skilled managers can beat their benchmarks and we also believe that transparency is an integral part of the reporting process. To this end, we report our UCITS funds net of fees on factsheets and marketing materials. Furthermore, we would welcome standardisation in how asset managers report their performance to clients.
As per the Hermes Pledge, we put the interest of our clients and beneficiaries first and we will spend the coming days and weeks reviewing this in-depth report and working across our business to identify any areas where changes need to be made.