M&G And Schroders To Quit Funds Trade Group

Two of the City's biggest fund managers are to quit as members of their industry's most prominent body in a move which may weaken its influence at a time of radical regulatory reform.

Sky News has learned that M&G Investments and Schroders (LSE: SDR.L - news) have informed The Investment Association that they do not intend to renew their membership when they expire in the coming months.

Collectively, M&G - best-known for its sponsorship of the annual Chelsea Flower Show - and Schroders manage more than £550bn of assets, or approximately 10% of the total overseen by the association's members.

The news that the two fund management giants are quitting the Investment Association is likely to send shockwaves through the City.

Schroders is represented on the trade body's board by Peter Harrison, its head of investment, while M&G executive Will Nott recently resigned from the board because of a role he was appointed to elsewhere.

Sources said that Mr Harrison remained "actively engaged" with the board's agenda but that he was also likely to step down when his employer’s membership of the Investment Association ended.

Their decision to terminate their involvement with the Investment Association comes despite the organisation's achievements on a number of key industry issues, such as efforts to avert a European bonus cap for the industry.

Under Daniel Godfrey, the Investment Association's respected chief executive, it has also played a key role in establishing the Investor Forum, a new body set up to improve dialogue between institutional investors and large quoted companies.

Among its other key projects have been to increase the level of disclosure about fees charged by asset managers, which many industry executives regard as a shrewd move to pre-empt more draconian regulation.

The Investment Association also took on the key role of day-to-day engagement with listed companies by absorbing the investment affairs function of the Association of British Insurers (ABI).

One source said that there had been some "blurring of the lines" between the roles of the trade association and the UK industry's regulator, the Financial Conduct Authority.

"There has been concern about the direction of travel for some time," another insider said.

Another fund management executive said that other big institutions were considering whether to follow M&G and Schroders.

Their move follows a similar decision by Legal & General (LSE: LGEN.L - news) last year to end its membership of the ABI, which it attributed privately to a belief that it could lobby more effectively on a bilateral basis rather than through the trade body.

The Investment Association is chaired by Helena Morrissey, the Newton Fund Management boss whose Euroscepticism is also likely to throw into sharp relief another key issue for the body's membership ahead of a referendum on Britain's membership.

Mr Godfrey said: “It (Other OTC: ITGL - news) would be incredibly disappointing to lose any member and we will do everything we can to convince anyone who is considering leaving to stay.

“Our very proactive strategy to help a great investment management industry make investment even better can be uncomfortable at times.

“But it is not only the right thing to do given the responsibility of managing other people’s money as their agents, it is essential in the post-global financial crisis world if we are to maintain the right to have influence over our future regulatory and legislative environment.”

M&G and Schroders declined to comment on Monday.