Research highlights governance challenges for fund boards

Posted: 13/10/2021

JerseyFinance _Funds Governance_oct21The rise of ESG investing, demands for specific experience and greater expectations on transparency are all shaping the fund governance landscape – but there is still a way to go for managers and boards to align with the governance objectives of investors, according to new research by IFI Global and supported by Jersey Finance.

The report – Funds Governance in 2021: What it Means to Investors – explores how approaches to fund governance are shifting among international investors in a post-pandemic ESG era.

Based on the views of investors and their advisers in North America, Europe, Asia Pacific and the Middle East, the research for the report was carried out between April and June this year. 

Key survey findings

• Overall, 54% of investors believe that ESG considerations will have an impact on fund governance.
• The overwhelming majority of respondents (84%) said they thought governance was helpful but not that important; 8% viewed fund governance as very important, the same number said it was not important.
• All respondents felt the purpose of fund governance was to protect the interests of investors, rather than to serve the interests of the fund.
• Investors want directors of the funds they invest in to be experienced. This is closely followed by independence.
• Gender diversity on the board did not evoke particularly strong feelings, though there was a sense that ESG investing might have an impact on this.
• Term limits for directors were wanted by the overwhelming majority of respondents (85%).
• 81% said they would like to see more transparency in fund governance, including in the selection process of directors.

Elliot Refson_oct21Elliot Refson (pictured), Head of Funds at Jersey Finance, commented: “It is perhaps surprising that, in a period where we have seen unprecedented change, fund governance continues to evolve at a relatively slow pace. 

"Nevertheless, approaches to governance are maturing in response to the ESG drive, greater demands for transparency and the need for deeper levels of experience.

"This is now the clear challenge for fund boards and managers – to focus on ensuring that their approaches to governance are fully aligned with those of their investors.”

• The new research can be downloaded here

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