UK - Corporate governance heavyweights Morley Fund Management and Deutsche Asset Management are launching funds that will try to turn around underperforming companies.
Sources at Morley say the firm has been looking at the viability of such a fund over the past year.
They say the fund will invest in firms which have underperformed consistently due to structural or strategic governance weaknesses – problems that could be corrected by active shareholder involvement.
Meanwhile, DeAM is planning to launch a corporate governance fund before the end of the year and is currently holding talks with brokers over distributing and marketing it.
A DeAM spokesman said a paper had already been written on the viability of the fund.
He said: “We have now written a brief with parameters of what we invest in and we’re currently in discussions with brokers.
“We could certainly do the marketing literature and things like that, but we still need partners to actually promote and help distribute the fund.”
Hermes Pensions Management has been managing activism funds for the past five years.
Deputy chief executive Charlie Metcalfe said that while schemes were increasingly interested in activism funds, they must be prepared for periods of low returns as it took time for the engagement work to produce any benefits.
He said: “Early investors here have seen the benefits and we continue to see interest from a number of areas – there are a number of big potential investors.
“But we’d rather have pension funds buying into this that have a high conviction, as there will be lean years.”
But Mercer Investment Consulting UK head Andrew Kirton said corporate governance funds were “a niche and will probably remain so”.
But Kirton agreed that the profile of shareholder activism among pension fund investors was rising.
He added: “Over time, quite a number of pension funds will take an interest in corporate governance as a general issue.
“What we will see more of is trustees putting pressure on their fund managers – when they do their investment work with companies – to use activism in their armoury.”
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