As investment opportunities become increasingly scarce, good governance is seen by many investors as a point of differentiation and key to investment performance, says Aberdeen Asset Management.
Recent research titled New risks, new rules commissioned by Aberdeen Asset Management found that out of the 293 trustees, managers and consultants surveyed globally – 89 per cent said good governance is a critical driver of investment performance.
Overall, 85 per cent said asset managers need to engage with the companies they invest in.
However, only 43 per cent of respondents said their asset managers are effective in this respect. Moreover, 37 per cent indicated that they are not.
The report found that 92 per cent of respondents believe asset managers should engage with investee companies on issues like corporate governance. Further, 83 per cent said discussions should feature diversity, structure and succession planning, with 76 per cent citing corporate actions and takeovers as a point of dialogue.
Aberdeen Asset Management Australia head Brett Jollie said: “Investors are now prepared to go further and build relationships with boards. As this research shows, such engagement can help returns over the long term.”
The report found that the majority of respondents expect governance to embrace each aspect of an organisation’s operations and finances, in addition to the economic and political risks relevant to the geographic environment in which it operates.
Aberdeen Asset Management head of corporate governance Paul Lee said: “Getting governance right, is easier if you take a long-term approach.
“A company is much more likely to talk to you if they don’t think you’ll sell their bonds or shares at the sight of one set of poor quarterly figures. We need to do more as an industry to invest for the long term ourselves and encourage the companies we own to do the same.”
In terms of the barriers restricting the practice of long-term investing, 70 per cent of respondents cited a short-term and peer-sensitive environment, while 48 per cent argued that regulation forces short-term thinking.
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