Capital Markets Corporate

October 4, 2019

Our Weekly Newsletter

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Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.

Fund management competition reaches ‘Money Ball’ levels
The fund management industry is now taking cues from the analytical arms race between US baseball teams, spurred from Billy Beane’s unique use of statistics made famous in Michael Lewis’ book and follow up Brad Pitt movie, ‘Money Ball’. The vast amount of data within fund management has driven some asset managers to analyse unconventional sources in hopes of outperforming rival groups, akin to the famed Oakland A’s manager. But while investing in technology may lead to a competitive edge, lessons from Money Ball show that rivals will soon catch on. (From Financial Times, 30th September 2019)

Stock market investors missing companies’ best years
Investors in the stock market may be missing the best years of a company’s growth as companies frequently secure funding from private equity funds through expansion capital, and only later rely on public stock markets once growth has plateaued. Situations like this often leave individual stock market investors watching from afar, while private equity “fat cats” obtain high returns. (From This is Money, 29th September 2019)

Motor insurance more expensive than fines
A recent study found that motorists pay more for their insurance than those driving without cover, prompting the industry to call for harsher penalties. On average, motorists pay £485 in insurance fees, while average fines are issued at around £362. Safety experts are pushing for harsher sentencing to prevent UK citizens from abusing the system. (From The Sun, 30th September 2019)

London’s bubble bursts
The capital’s real estate market has moved out of bubble-risk territory for the first time in four years, a new report from Swiss bank UBS suggests. House prices in London are roughly 10% below their mid-2016 peak, with the report noting that while the capital remains “overvalued”, the days of stratospheric annual house price growth are “long gone”. Munich and Toronto now top UBS’ Global Real Estate Bubble Index, with London in 9th place. (From City AM, 30th September 2019)

ESG uptake broadens

With ESG (Environmental, Social and Governance) quickly becoming the hottest buzz phrase in the asset management industry, almost two thirds of sovereign investors – who have previously been slower to pick up on this trend, despite being among the world’s largest global investors – are making social and environmentally friendly investing part of their approach. This compares to less than half two years ago. The news comes as separate research reveals it pays to be green, with solar and wind stocks outperforming oil and gas shares by a widening margin this year. (From Reuters, 30th September 2019)

Why the time is now for better Diversity and Inclusion

This week saw the launch of the #MeTooPay campaign, bringing together more than 100 of the UK’s leading businesswomen in an attempt to end gender-based pay discrimination.

The campaign, launched off the back of a recent case which saw a court rule in favour of a female banker who was paid significantly less than her male counterpart, aims to put an end unequal pay.

With a number of high profile, powerful supporters across several industries, the group is calling for “radical and rapid action” in a clear sign that the issue of improved diversity in business isn’t going anywhere.

Despite this heightened focus, a new report by PwC and the Diversity Project suggests that there is little evidence of progress in some industries at present.

While certain sectors have gone some way towards reducing their gender pay gap, others have yet to record any significant improvement at all.

For instance, the average mean pay gap for the investment management industry is currently 31%, with only half of the firms in this group reporting a year-on-year reduction in this figure. Of these, the majority only saw an improvement of 5% or less.

Worryingly, the report goes as far as to suggest that there may be some “resentment” about special programmes designed to develop more diverse talent. Some investment professionals may feel such initiatives are more an exercise in demonstrating “political correctness”, rather than being key to driving the success of their firm.             

This comes despite the clear business case for more diverse and inclusive businesses. Research from PwC suggests that diverse companies are more innovative, create more value and ultimately benefit from better business returns, all the while simultaneously improving their external reputation and ensuring they are more attractive to existing and prospective talent.

It is also important to remember that despite the current prevalence of gender-focused campaigns, diversity in all senses of the word is vital.

Whether that be on the basis of gender, ethnicity, socio-economic status or sexuality, building a more inclusive industry can only be achieved if all aspects of diversity are considered. Then, and only then, will businesses, customers and employees alike truly reap the rewards.

There are many D&I initiatives out there, some more authentic and successful in their objectives than others.

For the Diversity Project, their key piece of advice – aimed particularly at the investment management industry – is to align improved diversity with business’ long-term strategic goals in order to ensure the issue sits at the heart of all initiatives across every level of the firm.

This will then filter into more tactical execution – whether that be setting up role-model schemes, organising diversity networks or arranging unconscious bias training in the workplace – ultimately, enabling businesses to gain momentum and really start to move the dial on this issue.

In the words of the Diversity Project, it is time to deliver. The question is, are you ready?

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