Jon Beckett is UK director of the Association of Professional Fund Investors.
A Call to Asian Professional Fund Investors
What does it take to be a professional fund investor in Asia today? Asian professional fund investors find themselves amid a technological and regulatory revolution.
They face tough questions. To follow the journey of the Anglo-Saxon model or explore a new path? To embrace environmental, social and governance standards, or to exploit assets stranded by this concept? To go active or passive? To follow or to show leadership?
To this end, the Association of Professional Fund Investors (APFI) was formed to serve as a global body by and for its membership. It enables professional fund investors to share ideas, ensure best practices and network with peers, be they fund gatekeepers, fund buyers, manager research analysts or fund selectors.
Consequently, the APFI has already begun to build strong networks in the United Kingdom, Nordics and elsewhere in Europe. However our membership remains, frustratingly, lighter in Asia, Africa and the Middle East.
The APFI has held events in both Hong Kong and across Europe to debate the regulatory and technological future of fund research. We believe that due to the uniqueness of Asian fund markets, professional fund investors in these markets can share insights to the benefit of APFI members globally, and in return enjoy the experiences of like-minded professional fund investors from other regions.
The aim is shared global best practice.
A great example of this is the multi-year global Due Diligence Questionnaire project, which is rolling out in 2017 in association with Door, our technology partner.
The APFI seeks to be at the forefront of technological change within professional fund investing, and is looking for other technology and training partners to discuss the direction of the industry and opportunities.
More crucially the APFI is calling on professional fund investors in Asia to become engaged, to lead APFI initiatives in the region, to be a spokesperson, build membership, engage trade bodies and regulators, and champion professionalism in fund investing in Asia.
This is an opportunity to get involved with a growing professional body that is on the cutting edge of our field. It is an association created and run by professional fund investors, for professional fund investors.
APFI believes that the inclusion of the investors’ viewpoint is crucial to the sustainable growth of the asset management industry. To this end we act to ensure the continued recognition of the importance of professional fund investors and advance their role within the industry.
There are some simple truths that APFI members see as central. Certainly, there are others and we invite new members to add ideas, but here are the basics:
- Funds are bought by professional fund investors, not sold to them.
- Hot concepts are the basis for short-lived bubbles; APFI members seek to isolate funds and their managers that have sustainable investment merit.
- A strong competitive environment for funds is crucial, of which open architecture is a key component.
- A well thought out, sophisticated approach to fund research is forward looking and past performance is only a limited aspect of the selection process.
- There is no ‘right way’ to analyse and select funds – APFI members utilise a broad range of techniques and methodologies.
- Professional investors work most effectively in an environment of independence and objectivity.
One particular area of focus for APFI is responsible investing and how to bring this into the mainstream.
We are working with professional fund investors globally to consider, for example, the difference between socially responsible investing (SRI), which uses negative screening, and ESG approaches, and how investors should assess the differences.
That question in turn can vary between institutional investors and private banks, and also country to country depending on prevailing corporate governance conventions, for example, between Singapore and Japan.
Investors also have to establish whether there is a clear enough investment or risk management case for SRI/ESG. Other challenges include the lack of universally agreed standards for ESG. Without such standards, how do investors weigh up the investment case, cost, or the societal good? How important should an investor’s carbon and greenhouse gas footprint indeed become?
When considering responsible investing, should we also take a longer term approach to investing? The backdrop is the inescapable fact that assets are moving tectonically towards passive funds. Can an index tracking fund ever be a good steward of client assets?
In terms of changing behaviour, does activism, voting and corporate governance actually work? Ultimately, to bring responsible investing into the mainstream may require fund buyers, and all professionals in the value chain, to take a fiduciary oath to clients.
It is daunting to think that deciding these questions will prove less difficult than finding the answers. APFI is here to work with fund buyers through these challenges and we welcome Asian investors to join us in these endeavours.