The Asset Management Exchange (AMX) and asset manager DWS, working in partnership with Minerva Analytics and Northern Trust, have developed an investment solution that allows pension schemes to express their stewardship preferences in pooled funds.
The new pooled fund service aggregates investor stewardship preferences and seeks to execute votes in alignment with their expressions of wish. Where aggregate investor preferences conflict within a pooled fund, voting instructions can be split accordingly.
Institutional investors in pooled funds have historically relied on the investment manager to execute a voting policy for the pooled fund. However, when investor preferences have diverged from the manager’s policy, they have been forced to accept the votes placed by the manager. With this new Investor Stewardship Service, companies across the world can now receive proxy votes from the AMX DWS pooled funds aligned with investor preferences where possible on key topics such as climate change, executive compensation, and board diversity.
The launch of the new service follows the UK Government announcing in December 2020 the establishment of the Taskforce on Pension Scheme Voting Implementation to encourage industry solutions linking investor preferences to corporate voting actions (see notes to editors).
Guy Opperman, Minister for Pensions and Financial Inclusion, says: “I’m delighted to see AMX and DWS launch a product allowing trustees to choose a voting policy, which provides the same benefits of scale and efficiency offered by pooled funds. This will tackle, head-on, the industry practice of ‘invest in my fund, accept my voting policy’.
“I strongly hope this prompts other pension scheme trustees to challenge their fund managers about plans to offer this service and drives engagement with other key issues such as how their managers are engaging and voting on pressing issues such as climate change.”
Simon Howard, Chair of Voting Implementation Taskforce, says: “Voting is a key tool which allows pension funds to better meet their broader stewardship obligations, but pension funds have faced difficulties in getting their wishes reflected in the votes cast in their name. This makes no sense – none of the problems are insuperable. This new product from AMX and DWS shows the issues can be overcome and will allow funds to express views and get them implemented. The Taskforce on Pension Scheme Voting Implementation very much welcomes it. The UK needs to lead in stewardship and responsible investing, and innovative products like this – along with changes in attitudes – will be key.”
Christopher Head, Head of Business Development at AMX, says: “This is another step on our journey at AMX to provide institutional investors with best-in-class fund structures which disrupt the traditional and outdated ways of doing business. It is a paradigm shift which will begin the transition of voting power from investment managers to the rightful institutional asset owners and will increase the speed by which important climate change and governance issues are addressed by corporate stewards across the globe.”
Fiona Bassett, Global Head of Systematic Investment Solutions at DWS, says: “Providers of index solutions can no longer be facilitators of passive ownership of assets, so I am pleased that DWS and our partners are innovating in this space to move the market forward and bring about the reform that is now generally accepted is much needed. DWS’s index tracking expertise goes back decades, and we also have substantial resources committed to putting us at the forefront of ESG advances, so we have the capability to not only bring this solution to market but to make it a success.”
Clive Bellows, Head of Global Fund Services – Europe, Middle East and Africa at Northern Trust, says: “Northern Trust is delighted to support AMX and its clients in the creation of its investor stewardship offering. By combining our tax transparent fund expertise with experience of delivering asset servicing solutions to support corporate governance alongside our strategic voting partner Broadridge Financial Solutions, we aim to help significantly amplify investors’ voices. This innovative solution is a key step in fostering greater shareholder engagement and ethical investment for institutional investors.”
Sarah Wilson, Chief Executive at Minerva, says: “Pooled fund index strategies are an extremely cost-effective proposition for long-term investors. For too long, however, that has meant compromising on stewardship and voting issues. We’ve always believed that the application of smart technology can offer investors the best of both worlds: cost effective asset management with active ownership. We are therefore delighted to partner with AMX and DWS on this important and timely initiative.”