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Fund houses have knuckles rapped over transparency

Fund houses have knuckles rapped over transparency

The Financial Reporting Council (FRC) has revealed asset managers' adherence to its Stewardship Code, with some told to seriously improve engagement reporting or face being removed as signatories altogether.

The FRC has split fund groups into three tiers based on the quality of evidence of engagement with companies and focus on corporate governance, marking the first time in the Code's existence that the FRC has ranked signatories, with notable retail fund groups falling short of standards.

Some 120 asset managers achieved Tier 1 status, meaning they provided "good quality and transparent" descriptions of stewardship activities.

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Firms including Baillie Gifford, Baring Asset Management, EdenTree, JO Hambro Capital Management, Rathbones, River & Mercantile and RWC Partners were listed as Tier 2 - meaning they met many of the seven principles and numerous standards but were less transparent on their approach.

However, it was firms in the third tier, including the likes of Brewin Dolphin, Charles Stanley, Franklin Templeton Investments, Miton Group and Neuberger Berman, who face potential action by the FRC.

The body said: "Signatories to the Code have been tiered according to the quality of the reporting in their statements based on the seven principles of the Code and the supporting guidance.

"Asset managers who have not achieved at least Tier 2 status after six months will be removed from the list of signatories as their reporting does not demonstrate commitment to the objectives of the Code."

Chief executive Stephen Haddrill added: "Reporting against the Stewardship Code is not a box-ticking exercise and signatories were encouraged to provide a clear description of their approach to stewardship, with explanations for non-compliance where appropriate.

"We will be looking for continuous improvement from Code signatories."

The FRC first launched the Code in 2010 in a bid to increase stewardship and corporate governance on the part of investors. As primary owners of UK-listed companies, asset managers were encouraged to sign up, and in turn evidence how they adhere to its requirements.