For Keith Skeoch (pictured), CEO of Standard Life Investments, the IIC Advisory Council is an opportunity to show collective engagement on stewardship. In an industry dominated by fragmented opinions and viewpoints, he believes it’s important that the agreed views of the council are clearly communicated through effective representation.
“The IIC is a coming together of industry bodies including the IMA, NAPF, ABI. It’s a channel for senior industry figures through which we are able to represent not only the industry on major topics, but our clients and customers as well,” Skeoch tells Hedgeweek.
With such pervasive disagreement amongst member states of the eurozone as politicians try to grapple with the debt crisis, it’s easy to appreciate how vital it is to find a common voice, a consensus, when faced with major challenges. Clearly, it’s something the Advisory Council strives to achieve. As Skeoch puts it: “The IIC is a mechanism to facilitate pushing through investors’ views.”
One of the key areas around which the council needs to shape the debate is ‘long-termism’ according to Skeoch: “We need to be asking what it is, what does it mean?” August has seen unprecedented volatility. The FTSE 100 Index had GBP60billion wiped off its value on 18 August, it’s ninth highest fall in history. It was a similar story at the start of the month. Investors are becoming increasingly more short-term in their approach to the stock markets, so much so that UK business secretary Vince Cable has appointed the economist John Kay to lead a review.
Another issue high on the agenda will be to continue the debate on the stewardship code and “examine how developing guidelines can help UK plc. If we don’t adopt the right tone we’ll attract the attention of regulators which I don’t think we need right now,” comments Skeoch.
Amidst such volatility in the markets in 2011, the task for fund management houses like Standard Life Investments to find attractive asset classes that can deliver long-term returns is rather daunting. “You have to be patient, there’s little chance for aggressive short-term trading,” notes Skeoch, confirming that with so much distortion in the markets SLI is spending its time looking at the hard fundamentals.
“We’ve been pouring over sectors/stocks, markets/regions that we believe are over-discounted or over-sold. Opportunities arise from identifying these market anomalies. Long-term we see good value in equities, particularly in emerging markets like India. If you’re of the view that the political issues will get resolved, India could be a good long-term bet. Companies there are trading at substantial P/E discounts.”
Skeoch adds: “In a world driven by top-down macro analysis, long-term value is often found through a bottom-up fundamental approach.”
When asked whether investors are having to think about taking on riskier assets to tackle their long-term liability pressures Skeoch admits that the appetite is there for higher returns “but there’s an equal appetite for diversification and that’s drawn out by the markets”.
One of SLI’s best-selling funds is its Global Absolute Return Strategies, designed to deliver higher returns with lower levels of volatility by exploiting inefficiencies in global markets.
“Over the past year the spread between the GARS fund’s highest and lowest price (66.5 to 63.5) was 4.5%. By comparison the FTSE 100 spread was around 22%. Investor assets are flowing into funds like ours that dampen volatility. They’re looking to diversify, but they remain cautious on volatility,” says Skeoch.
Over the next two years, Skeoch hopes the Advisory Council is successful in a couple of areas. Firstly, that it makes a significant contribution to the stewardship code and what long-term investing really means in order to help restore peoples “trust and confidence” in financial services. Secondly, he hopes the council can help shape policy debate and show that fund managers can be a force for good.
“Fund managers are systemically important but not systemically risky and during the ’08 crisis our voice wasn’t heard clearly enough. It’s the start of a long journey so I hope we’ll be laying down strong foundations over the next couple of years. It’s important we, as a council, don’t suffer from short-termism."
