Stewardship in fixed Income
Equity shareholders do have significant powers, most notably the power to vote at shareholder meetings and thus the power to directly influence the appointment and remuneration of board members and senior management, as well as the outcome of share issuance and buybacks, mergers and takeovers. Conversely, bondholders do not, except (sometimes) in the case of bankruptcy or change.
However, there are four crucial points that can be overlooked.
So, stewardship in fixed income is a position of significant influence for all borrowers, not just corporates.
Many indexation managers now consider themselves as long-term stewards of their clients’ equity capital (see our previous paper: “Investor stewardship: one hand on the wheel?). However, when asked, not one indexation manager regarded themselves as long-term stewards of fixed income capital. Further, they seem to conduct little to no engagement with bond issuers that do not have listed equity.
We find this disappointing given the considerable amounts of money in passive fixed income mandates, and also surprising given the increasing number of ESG-tilted fixed income strategies. Additionally, some of these large managers make great efforts to tout their stewardship credentials.
Read the attached article where we set out steps indexation managers should consider to improve their stewardhip activity
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The rights of perpetual creditors - Stewardship in fixed income | .2 MB |