Is the investment profession shy about the good it does

Thursday 16 March 2017

The investment profession's core goal is meeting client investment needs. But we also do a lot more. Fabrizio Palmucci, a product specialist at Jupiter AM and chair of the capital allocation committee, and Jane Coffey, an investor coach and former fund manager, who oversees our Value of the Investment Profession working groups, strongly believe the only way to get the wider public to appreciate the benefits we bring to society is to get the profession to appreciate them first. They talked to David Clarke, CFA about the workings of the Capital Allocation working group.


Jane Coffey Fabrizio Palmucci

Left: Jane Coffey, an investor coach and former fund manager

Right: Fabrizio Palmucci, a product specialist at Jupiter AM and chair of the capital allocation committee

Why has the Value of the Investment Profession project piqued your interest?

Fabrizio:  I speak to clients on a daily basis, and a lot of the time it’s about the ‘what’ and the ‘how’ of investing. What are we invested in, such as US Treasuries or convertible bonds, and how do we do it. We don’t talk enough about what the purpose of all of this is – the ‘why’. Over my career I have come to the conclusion that we don’t really talk about this at all and that’s how I came to the discussion with CFA UK and ended up chairing the working group.

Why is capital allocation such an important topic?

Fabrizio: Because capital allocation is very much linked to the purpose of the asset management industry – because it links us into much bigger ideas that affect the world. If we think about the 2030 sustainable growth plans of the United Nations, they are very laudable goals about healthcare and about the environment. As part of this initiative they published a report talking about how finance can contribute to those goals. And as asset managers, there are two main things that we can do: the first is about corporate culture, making sure that people understand it’s not just about making money; the second is about corporate governance, and that is very important because it’s about me as an asset manager looking at how to get companies to operate efficiently and getting management to do what it is supposed to do.

But does this really matter to clients, or to asset management companies for that matter?

Fabrizio: This is a very important topic for me personally, but as well as a product specialist. When I engage with clients on this there is a passion about the subject. If I take a meeting and the conversation turns to high level issues like the role of the asset management industry in society and how our day-to-day decisions affect clients, it gets even more engaged. It raises awareness and enhances the relationship with the client, and from the corporate perspective it’s much better because you connect better with a client. After the financial crisis finance has been seen by some as almost evil – trying to make money on the back of the public resources. We as asset managers are sometimes confused with the banks who engaged in the worst excesses during the crisis. If we talk about the good that we do that helps us overcome this reputational issue.

But isn’t capital allocation a rather dry topic – is not going to be difficult to get people interested?

Jane: I think a lot of the time people misunderstand what we do in capital allocation because it doesn’t seem real to them. One of the reasons why it’s important to promote how we influence capital allocation across the economy is because that’s what keeps the economy working. I come from an economics background and the reason I went into investment management was because it was a way of having a positive influence on things, making the capitalist economy work well. But I’m often surprised at how few people put these things together. Even people who are in the industry and actively engage with corporate management, often don’t appreciate how much they are influencing society by directing capital to where it is needed. Our objective is to increase awareness of people in the asset management industry about why what they do has a positive impact not just on customers but on the way the entire economy works.

So what should asset managers be doing?

Jane: This is where we need to get into how we engage with companies, the whole stewardship issue. If we give companies long-term targets and let them know that we want them to invest for the long term, and that we are interested in environmental and social impacts as well as short-term profits for the next quarter, that dictates how companies will make decisions. We are the ones with the capital and therefore the ones who can influence the companies. What I’d like as a result of this project would be the greater number of people working in the industry feeling a greater connection to stewardship and how it isn’t just about ticking a box on a voting form – that they actually feel they can make a difference.

And how do you plan to get asset managers talking about this?

Jane: We are planning a series of events aimed at raising awareness across the industry, tailored to different parts of the profession – portfolio managers may have a different angle on the benefits of capital allocation than marketing people, for example. And the second thing we are looking at is a course on applied stewardship, to show managers how to engage constructively with companies that they own and the benefits that will bring.

What would be the ideal end result?

Fabrizio: If someone asked me what I do, I want to be proud to tell them I work in investment management. I am proud of what I’m doing, and if, as a profession, we are motivated about what we are doing we will make better decisions, and that will be to the benefit of our investors.


Professionalism Conference 2017

Wed 26 April 2017 at the Law Society, London

Learn how the investment sector and CFA UK are responding to challenges such as stewardship, charges and transparency; how these challenges might develop in the future; and practices that can be adopted from other professions to improve client outcomes. Book now