Displaying items for 2020

Although a number of asset managers purport that their investment products embrace ESG (environment, social, governance) principles,  EU regulators are now insisting that they be able to prove it. This intervention comes following widespread regulatory and investor concern that some fund managers have been mis-labelling their funds as being ESG-compliant when they are not, a practice otherwise known as greenwashing. In order to put an end to this behaviour, the EU is pushing ahead with its Sustainable Finance Disclosure Regulation (SFDR), which comes into effect from March 2021, and will impose heightened ESG transparency requirements on asset managers.SFDR in a…

Illiquid assets are not for retailWhile asset managers have largely navigated COVID-19 – both in terms of investment performance and operational resiliency – a number of longer-term risks are starting to emerge. Ultra-low interest rates are unlikely to disappear anytime soon, nor will the widespread equity market volatility, both of which are going to negatively impact investment returns. In response, there are now growing calls by some in the industry for retail investors to be given easier access to illiquid asset classes such as private equity. NCI believe this is a mistake, and risks doing major harm to the industry’s…

Having had more than four years to prepare for Brexit, the majority of UK investment firms appear to be in a reasonably robust position to withstand any challenges that may arise. In July 2020, the European Securities and Markets Authority (ESMA) and national EU regulators reiterated that the memoranda of understandings (MOUs) it agreed with the UK Financial Conduct Authority (FCA) on cooperation and information exchange in the event of a no-deal Brexit were still valid. According to ESMA, the MOUs will help facilitate continuity for financial institutions if no UK-EU deal is obtained.Although fund managers are confident that existing…

In August 2020, the European Securities and Markets Authority (ESMA) published a letter to the European Commission (EC) outlining its recommendations on future potential amendments to the Alternative Investment Fund Managers Directive (AIFMD). The letter’s contents have yielded a mixed response from the asset management industry. The NCI takes a look at some of ESMA’s proposals.Greater harmonisationThe lack of harmonisation between UCITS and AIFMD has been a source of frustration at asset managers for a long time. Accordingly, ESMA has asked the EC to align AIFMD and UCITS where possible. ESMA also said there needed to be greater consistency between…

Although interest in ESG (environment, social, governance) investing has been gathering momentum for several years now, Covid-19 has accelerated this trend exponentially. Data released by Morgan Stanley shows issuance of social and sustainable bonds topped $32 billion in April 2020, a monthly total surpassing that of green bonds for the first time ever. The market share grab by social bond issuers has been extraordinary, but it is reflective of a wider shift into ESG by investment managers.The rise of ESG has been organic, fuelled by institutional clients becoming more aware about societal and environmental issues, and who in turn are…