Ruth Sullivan

Do fund managers do what they say? Well, it seems not. At least when it comes to the frequency they change portfolio stocks.

Some equity fund managers have higher portfolio turnover rates than they claim, according to Investment Horizons, a report by Mercer, the consultants, and New-York based Investor Responsibility Research Center Institute.

Ruth Sullivan

Hand cradles a globe above the cracked earth

Half of UK consumers would like to check the ethical credentials of their next investment

Post credit crunch, most people would expect investors - or would-be ones - to focus on how to gain returns from any financial product, while other considerations such as ethical concerns have headed out of the door.

Not so, it seems. An Ipsos Mori/Eiris consumer survey that dropped into my email box today, showed nearly half of UK consumers are keen to find out about the ethical credentials of their next investment. Given that most of those polled are already investors, they are likely to have some relevant views.

They felt banks and other financial institutions should prioritise concerns such as protecting human rights, investing in fair trade, protecting the environment and tackling climate change. These are now the hot issues rather than the more traditional ones of manufacturing relating to alcohol, tobacco and gambling, says Eiris, the Ethical Investment Research Service.

But there is still a long way to go. Awareness of ethical financial products is low as is trust, with more than a third not believing claims made by financial providers. But only 15 per cent thought ethical products were likely to underperform similar standard products.

They might want to take a look at a report brought out this week by Mercer, the consultant, that lays out volumes of academic research on how taking account of environmental, social and corporate governance issues can have a positive impact on portfolio returns.

One thing is sure. Green, social and ethical funds have grown considerably in number and size in Europe over the past year, in spite of the fall-out from the financial crisis.

The number of retail funds increased over the year to the end of June to 683 from 537, or by 27 per cent, according to Vigeo, a corporate social responsibility ratings agency, and Morningstar.

Ruth Sullivan

One meeting to watch out for today is the sustainable stock exchanges event in New York, hosted by several United Nations’ bodies including the the UN Principles for Responsible Investment.

The aim of the gathering is to take stock of how the world’s exchanges can work together with investors, regulators and companies to increase corporate transparency and encourage responsible long-term investing.

This will involve tackling environmental, social and corporate governance issues. Eiris, the Ethical Investment Research Services, says one of the key drivers will be to include ESG disclosure into listing rules and corporate governance standards.

Paul Abberley, chief executive of Aviva Investors London says little support from listing authorities “who play a crucial role in setting out what companies report to the market” has come so far.

Many present today will be hoping to discuss measures to encourage best practice among companies through sustainable indices. Some exchanges such as Johannesburg Stock Exchange Socially Responsible index or the Deutsche Borse Daxglobal Alternative Energy Index, and the Indonesian exchange have already done this but there is plenty of scope for others to follow.

Global stock exchanges are likely to hear some challenging calls to take action.

Ruth Sullivan

Norway’s Government Pension Fund seems to have it all. Oil wealth, decent returns and a responsible approach to investment.

The decision to put part of its oil wealth to work for the country’s pension pot is one that makes many pension savers in other parts of the world gnash their teeth in envy, particularly if they happen to live in a resource-rich country that has not invested its black gold in the same way, such as the UK. 

Ruth Sullivan

 

a man in a business suit with dunce cap

Consumers have low levels of financial literacy

Are we financially savvy enough to make the right decisions about how to  invest for retirement or calculate mortgage payments or avoid the danger of repossession?

Not enough people are, according to the OECD. In a recent study  the organisation found consumers not only have low levels of financial literacy preventing them from making informed financial decisions but they often overestimate their knowledge and skills.

Now Allianz has launched a website where people can find out about a whole range of financial terms to help their decision making, from estate planning to merging portfolios after marriage. There’s even a chance to trace how the price of coffee has increased in the past 30 years or how it might change in the future.

And if that doesn’t help to demystify some of the jargon then try the Financial Times lexicon.

Ruth Sullivan

The challenge of setting up independent pension trustee boards is an uphill task.

Any hopes of making progress were dashed today, reading the latest findings from Trustee GAAPS. Only one third of pension trustee boards of FTSE 100 companies are independent, according to the trustee search firm.

Ruth Sullivan

Old people crossing road hazard sign

Danger ahead

The prospect of living in poverty or at least in tightened circumstances in old age is not daunting British workers.

One in three people currently at work plan to rely on whatever the state provides when they retire, according to research carried out for Baring Asset Management.

Ruth Sullivan

Pensions bonanza cancelled

Pensions bonanza cancelled

Now it’s official – the much trumpeted pension buy-out market has fallen flat. And just to spell it out, a report by Punter Southall called the False Dawn reveals that most (about 84 per cent) pension schemes trying to transfer liabilities to an insurer through a buy-out would find it cheaper to just adopt the same low-risk investment strategy an insurer would use.

Ruth Sullivan

As the gold price tops $1000 amid worries over dollar weakness, many investors are piling into bullion as a safe haven.

But for those still not convinced try reading Reasons to Avoid the Gold Rush or Avoiding the gold trap  

 

Ruth Sullivan

Yet another sign that final salary pension schemes are heading for extinction dropped into my mailbox today, a gloomy reminder that fewer and fewer employees are going to enjoy the luxury of a pension linked to their salary and will be forced to head along the more perilous defined contribution route.

A breed at risk

A breed at risk

Billed “the end really is nigh”, a report from Pension Capital Strategies reveals only 20 FTSE 250 companies are still committed to final salary schemes for a sizeable number of employees. Only 140 have any final salary scheme at all and just 92 of these are providing more than a handful of current employees with final salary benefits.

It is easy to understand why. The total deficit of the companies’ schemes had risen to an alarming £12bn at the end of June, showing a deterioration of £6bn compared to a year ago. Even more worrying is the fact that the pension liabilities of 27 of the FTSE 250 companies are bigger than their stock market value, representing a risk to the business. GKN’s pension liability is more than treble its equity market value.

Many companies are trying to stem the growth of these pension liabilities by closing their defined pension schemes to new entrants, says PCS.

Just like the larger companies in the FTSE 100, those listed on its smaller sister index are reacting to economic challenges by reducing pension scheme costs and risks through closing DB pension schemes to new entrants or shutting them down altogether.

Expect very few private sector DB schemes to remain alive and well over the next two or three years.

About the blog

FTfm is no longer updated but it remains open as an archive.

FTfm's specialist writing team offer their insights into the global fund management industry.

About the authors

Pauline Skypala has been editor of FTfm for four years having previously been deputy personal finance editor. She joined the FT in 1999 and has been writing on savings and investment issues throughout her career.

Steve Johnson, FTfm deputy editor, has been a journalist for 17 years, 10 of which have been with the FT.


Sophia Grene, reporter on FTfm, has been a financial journalist in print and online for 12 years.

Ruth Sullivan has worked as a financial/business journalist and foreign correspondent and for the past 10 years has been at the FT.

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