The annual Financial Reporting by Investment Managers 2014 (FRIM) report revealed that on average, investment management firms had an average of 15% female board members and just 4% at executive director level.
The UK investment management industry continues to grow as it reaches pre-crisis levels. However the industry is suffering from a severe lack of female representation, despite the high corporate governance expectations placed on the boards of companies in which they invest, according to a KPMG report.
The annual Financial Reporting by Investment Managers 2014 (FRIM) report, which analyses the most recent annual reports of the UK’s largest investment managers and examines the key trends impacting the industry, revealed that on average, investment management firms had an average of 15% female board members and just 4% at executive director level.
These figures are well below the European Commission’s proposal for a directive introducing a minimum representation of women on the boards of listed companies of 40% by 2020, as well as the UK’s Davies report, proposing that FTSE 100 boards should have at least 25% female representation by 2015.
Melanie Richards, partner and vice chairman at KPMG said, “Considerable progress has been made in recent years to ensure greater diversity at a senior level. There is not one member of the FTSE 100 without female representation in the Boardroom, the proportion of companies edging closer to Lord Davies target is edging up, and changes are clear to see in many of the UK’s leading industries.
“The common denominator connecting all these organisations is the realisation that greater inclusivity opens doors to a wider pool of talent and paves the wave towards better performance as firms mirror their target market with more accuracy. Our report reveals that UK investment managers still have some way to go to match these levels, yet we will only really take a quantum leap towards better gender balance when organisations treat this as a mainstream, not a 'diversity' issue.”
Key highlights also include an average growth of 13% in AUM with all but three managers analysed reporting AUM levels above pre-crisis (2007 / 2008) levels. Firms whose AUM grew by more than 10% attributed this to net inflows, improved equity market performance and favourable exchange rate movements.
Despite the often publicised notion that CEO remuneration is disproportionate to company performance, the report highlighted that the change to executive pay in the sector correlates with performance. While CEOs received no salary increase last year, bonuses increased by 19%, which may reflect the upward trend in performance, as firms achieved a 38% year-on-year boost to the total shareholder return and a 15% increase in net income.
However most executives and CEOs will not receive the full bonus this year. Over 70% of the firms analysed included deferral in their executive bonuses, with an average of 50% of bonus pay being deferred and typically for three years.
Furthermore, 75% of firms incorporated “malus provisions”, providing them with the ability to recoup awards in the event of certain negligent or fraudulent acts, such as misstatement of performance.
Jon Mills, investment management partner at KPMG concluded, “From analysing the past financial reports, we can shed some light on the key trends impacting the investment management industry. However as the industry continues to grow, there are new opportunities for firms to capitalise on key trends such as technology, developing markets and changing demographics.
“The difficulty of responding to these changes will be compounded as they come at a time when firms are under increasing pressure to demonstrate corporate governance, improve reputation, address remuneration, reduce fees and adapt to new regulation. While change can be fearful, firms that ensure their investors, regulators and other stakeholders are adequately informed are best positioned to embed confidence and secure long-term growth.”
The full report can be downloaded here.
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Notes to editors:
About the Financial Reporting by Investment Managers 2014 (FRIM) report
The annual FRIM report is a comprehensive analysis of both financial and non-financial information from the UK’s largest investment management firms.
1 The report’s findings is based on a combination of analysing public accounts from 17 of the UK’s largest investment management firms2 and a separate survey of 16 selected investment management firms3, conducted on a completely confidential basis around their regulatory capital approaches.
2 Annual reports analysed in the report include those from Aberdeen Asset Management, Ashmore Group, Brewin Dolphin Holdings, Charles Stanley Group, F&C Asset Management, Hargreaves Lansdown, Henderson Group, IFG Group, Impax Asset Management Group, Intermediate Capital Group, IP Group, Jupiter Fund Management, Man Group, Rathbone Brothers, Record and Schroders.
3 The regulatory capital analysis was a completely confidential review and the list of firms above does not reflect the participants of that section.
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KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 156 countries and has 152,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.