Winterflood Monthly Report - February 2021

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Results of 2021 Investment Companies Survey

We have conducted an annual survey focused on the Investment Companies sector since 2012 and believe that it provides fascinating insights into views on some of the key issues facing the sector. This year we had over 100 responses and the results were once again illuminating.

We asked whether the decision by a board to change a fund’s investment manager should be accompanied by a liquidity event. 38% were prepared to leave it to the board’s discretion, recognising that the decision can reflect a number of different factors. However, 30% were adamant that a liquidity event should always be offered. 32% were of the view that a liquidity event should only be offered when there is a change of mandate or asset class.

For the third year running, we asked for views on paying enhanced dividends, i.e. income paid from capital. In 2019, 52% had a negative view of the practice and only 11% took a positive view. Two years on and respondents with a negative reaction had fallen to 38%, while 13% claimed to be positive and 49% neutral. We suspect that this reflects a number of successful instances where funds have adopted the practice to good effect.

We also asked what factors might prevent investors from backing the launch of a new fund. The level of ongoing fees was seen as the most important one, although lack of track record and limited time for due diligence were also cited as reasons for non-involvement.

We revisited views on the importance of ESG in investment decisions and it would appear to be growing in importance. 18% said ‘very’ compared with 11% a year ago, while ‘not at all’ fell from 13% to 6%. 62% elected for ‘somewhat’ (2020: 68%), while 13% said ‘only governance is important’ (2020: 8%).

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