Thirteen European countries, expanding from a core group of eight, are participating in a project to produce European and global standards for investment performance measurement.
The momentum for establishing recognised standards come from different bodies depending on the country, according to Dugald Eadie, chairman of the European Federation of Financial Analysts’ Societies (EFFAS) and of its permanent commission on performance measurement.
In the UK it is the clients, through the NAPF and - to some extent for retail products - the regulators who are behind the call for standards. In Germany and Switzerland it is the banks and in the Netherlands - where investment managers are a tight-knit community - the profession itself.
The project has also created interest in countries where there is no established performance measurement. Italy, for example, will be represented at the next commission meeting in March.
Eadie, group managing director of Henderson Investors, who in recent years headed The WM Company, says the commission plans to review the global standard in the autumn, with an EFFAS conference reporting on progress in implementing it held in September 1998.
He cites the situation with global accountancy standards as one to avoid. German companies, for example, must re-do their accounts to achieve a listing in the US. What I am trying to avoid is having the UK or the US standard held out as the answer and imposed on people.”
He emphasises that one of the major aims is to get an agreed position for working across borders but the process is complicated and subtle. “We are trying to get common principles agreed across the world, accepting that in practice the way they are implemented might have to differ country-by-country for reasons of regulations, tax etc.”
However, while he wishes to avoid imposing US standards, he does cite the Association of Investment Management and Research (AIMR) as strong on ethics and able to provide the basis for common ethical standards. The commission has consulted extensively with its representatives on the way forward.
Before AIMR set up its standards, Eadie explains, US investment managers were accused of presenting only their best portfolio to potential clients. Now such incomplete disclosure is not possible. “It is these ethical principles plus the technical principles that you have to combine into what we are going to call a global standard. After that the implementation will take some time.” John Lappin”
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