Investor Body Fights To Avoid Member Exodus

The fund management industry's biggest trade association is facing a battle to avoid the resignation of members controlling more than £1trn in assets ahead of a crucial directors' meeting on Tuesday.

Sky News has learnt that Fidelity Investments, which manages £184bn, is considering joining M&G Investments and Schroders (LSE: SDR.L - news) in terminating its membership of the Investment Association.

Sources said on Monday night that Aberdeen Asset Management (Other OTC: ABDNF - news) and Invesco Perpetual, two more of the City's most influential institutional investors, were also examining whether to sever their links with the body.

The news comes just hours after Sky News revealed that M&G and Schroders were to quit the Investment Association amid what they see as a divergence between their views and the trade body on several key industry issues.

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 organisation's members.

The Investment Association's non-executive directors are understood to be attending a scheduled meeting on Tuesday which will address the unfolding crisis over its membership.

One source suggested that Helena Morrissey, the powerful fund management boss who chairs the Association, was determined to resolve the situation, and that she would reaffirm her unequivocal support for its chief executive, Daniel Godfrey.

"It (Other OTC: ITGL - news) is not inconceivable that she could resign if the board does not support her stance," said one source.

Some executives at fund management institutions said that Ms Morrissey's Euroscepticism had also discomfited them at a time when many are giving tacit support to the campaign to keep Britain in the European Union.

Allies of Ms Morrissey said her personal views on the subject, which had been public for many years, did not impact upon her chairmanship of the Investment Association.

The dissatisfaction of some City institutions with their trade body has crystallised in recent months over issues such as its Statement of Principles, which outlines behavioural standards such as the need for fund managers to put clients' interests ahead of their own.

A list of signatories to the statement published in August did not contain the names of Aberdeen, Fidelity, Invesco (NYSE: IVZ - news) , M&G or Schroders.

However, many fund managers remain supportive of the reform agenda driven by Daniel Godfrey, the Investment Association chief executive.

The split in its membership has arisen despite its achievements on a number of key industry issues, such as efforts to avert a European bonus cap for the industry.

It has also occurred at a critical time for the industry's reform agenda, with some observers suggesting that the crisis could diminish the Investment Association's influence in Europe.

Under Mr Godfrey, the body 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 has been an effort 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.

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.

Mr Godfrey said: “It 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.

Aberdeen, Fidelity, M&G and Schroders declined to comment on Monday, while Invesco did not return calls seeking comment.