Chicago
20 June 2017
Reporter: Stephanie Palmer

Northern Trust: Investors are taking transparency seriously


Transparency is an increasingly important factor when considering investment into both traditional and alternative assets, according to research by Northern Trust and The Economist Intelligence Unit.

A survey of 200 senior asset management and institutional investor executives suggested that transparency has become significantly more important to investors since before the financial crisis.

The ‘degree of transparency’ was named as a ‘very important’ consideration for alternative investment by 63 percent of respondents. For traditional investments, it was very important for 62 percent.

The survey also found that, post-investment, more alternative investors are concerned about the degree of risk than about the degree of transparency in their investment, while the opposite is true for traditional investors.

For alternatives, 25 percent said the degree of risk is the most important post-investment consideration, while 17 percent said this is the degree of transparency, and 16 percent said it is the degree of liquidity.

However, the report also suggested that pre-crisis, while 21 percent would have considered the degree of risk as the most important factor, only 3 percent would have have been most concerned about transparency.

Similarly, for investors in traditional asset classes, the degree of transparency was the most important factor for 21 percent, compared to 9 percent pre-crisis.

The degree of risk was considered most important by 18 percent, similar to the pre-crisis figure of 16 percent, while the degree of liquidity was most important for 15 percent of traditional investors both pre- and post-crisis.

When asked why transparency has become more significant for both alternative and traditional investment, a vast majority, 73 percent, of respondents cited portfolio risk management as a significant driver.

The second-most cited driver was regulatory requirements, named by 53 percent, and this was followed by competitive considerations, considered a driver by 43 percent.

However, the report noted that there is little industry consensus on who should have the final say on transparency requirements. A third of respondents, 33 percent, said the decision is down to the investment committee collectively, while 20 percent put the onus on the chief investment officer, 15 percent place it on the CEO.

Further, 10 percent said the CFO would have the final cay, and 9 percent put the decision-making down to the chief risk or compliance officer.

The report also suggested that “this lack of overriding consensus cuts across every type of organisation”.

It went on: “No clear pattern emerges overall, indicating a lack of agreed-on best practices in the industry.”

Pete Cherecwich, president of corporate and institutional services at Northern Trust, said: “These results tell us that investment transparency is a growing priority, but asset managers and institutional investors remain unsure of how to best achieve it.”

He added: “As alternative investing has reached the mainstream, the industry would benefit from consistent standards and stronger policies around transparency. Working with the world’s most sophisticated investors, we are committed to enabling greater transparency through continued research and technology development.”

More Industry news
The latest news from Asset Servicing Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
AcadiaSoft expands user base for IM compliance
21 September 2017 | Massachusetts | Reporter: Drew Nicol
The second phase of the IM rules went live on 1 September under the regulatory framework of BCBS and IOSCO
UCITS funds enjoy assets boom in Q2
18 September 2017 | Brussels | Reporter: Jenna Lomax
The latest growth figures represent the highest level of net sales recorded since Q1 2015
Gestar acquires ESG solution provider ISS
08 September 2017 | New York | Reporter: Stephanie Palmer
Genstar Capital is to acquire Institutional Shareholder Services (ISS), a provider of corporate governance and responsible investment solutions, from Vestar Capital Partners
AxiomSL expands European presence
07 September 2017 | London | Reporter: Stephanie Palmer
AxiomSL has opened new offices in Paris, Madrid and Frankfurt, in a bid to strengthen support for clients in those respective countries
World’s pension funds return to form in 2016
05 September 2017 | London | Reporter: Drew Nicol
The world’s largest pension funds increased their assets under management by 6.1 percent in 2016, and are now worth $15.7 trillion, according Willis Towers Watson
Northern Trust appoints new head of Southeast Asia
30 August 2017 | Singapore | Reporter: Jenna Lomax
Northern Trust has chosen Yen Leng Ong as its new country head of Singapore and head of Southeast Asia
SIX reports strong results for 2017 so far
30 August 2017 | Zurich | Reporter: Stephanie Palmer
The securities services business drove strong results for SIX during the first six months of 2017, recording an operating income of CHF 189.1 million (€165.65 million)
More Industry news