This article first appeared in City A.M, 24th October, 2019
In the wake of the Woodford scandal, is there enough oversight of fund managers?
Yes – Darius McDermott is managing director of FundCalibre
There were a number of issues I took strong exception to in this week’s BBC Panorama programme on the Woodford saga, but the conclusion that there is very little regulatory oversight of fund managers was the most inaccurate.
I fully accept that, like all industries, there are going to be a few people who break the rules. But while Neil Woodford certainly made mistakes, it is totally unfair to suggest that the whole industry is full of crooks and gamblers.
UK asset management is in fact one of the most regulated industries in the world. The vast majority of companies take those regulations extremely seriously, which is why they have compliance teams to oversee all the functions of the firm.
In addition, most firms also have independent risk teams to oversee the investment side of the business. One of the key functions is to make sure that fund managers stay within the remit of the fund as stated in the prospectus. So there is plenty of oversight, from both regulators and the firms themselves.
No – Bev Shah is founder and chief executive of City Hive
Like with investing, oversight is an art not a science. In order to truly protect the end investor and future-proof our industry, we need to widen our scope and revisit the current frameworks we use to plug the blind spots.
As an entity, an investment management company should be holistically scrutinised, with the focus going beyond a set of quantifiable audited accounts or a self-attested due diligence questionnaire. We need to start fully respecting and recognising that examining qualitative aspects, such as corporate culture and behaviour, can raise more red flags than any spreadsheet will.
But red flags aren’t much use unless they are acted on, as we have seen with the Woodford saga, where early concerns were ignored.
Policymakers need to collaborate with those who do the day job and understand the real-world implications of the system, to modify and test any oversight framework to ensure that it is robust and has a positive impact with some form of independent verification.
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