Schroders boss: Asset management must ‘come to the party and embrace risk’ to revive London markets
The asset management sector needs to “come to the party” and “embrace risk” in order to revive London’s floundering status as an international financial centre, the chief of Schroders has said.
In a rallying cry for sweeping change in the City, Peter Harrison, the boss of the FTSE 100 asset manager, said London had developed an obsession with “commentating on its own demise” and firms instead need to throw themselves behind risk and reform.
His comments come amid a period of soul-searching in the Square Mile as regulators and officials scramble to revive London’s listing market after a number of firms seemed to ditch the capital in favour of New York.
Writing in the Financial Times, Harrison hailed a number of reviews to the UK’s capital markets and moves by the regulator to change IPO rules, but said more the City needed a culture shift on issues like executive pay and allocating pension cash to more productive assets.
“My own industry, asset management, needs to come to the party wholeheartedly if it wants a vibrant market in which to operate,” he wrote.
“This will include some uncomfortable conversations over executive compensation. It is a critical issue.
“I applaud Julia Hoggett, the London Stock Exchange’s chief executive, for speaking out and sparking that debate by calling for UK executives to be paid more if the country wants to retain talent and deter companies from moving overseas.”
The London bourse boss last week called for a reappraisal of executive pay if City firms were to continue to tempt in top talent.
Harrison added that asset managers also need to throw their weight behind moves to divert cash into more “productive growth” and “businesses that deserve it”.
The comments point to a debate gripping the City over how to get more UK pension cash funnelled into private growth firms and the stock market.
Asset managers in charge of UK pension cash have slashed their domestic equity holdings over the past two decades, triggering calls from top City figures, including Hoggett, for faster consolidation of pension funds to solve the issue.
Harrison said the returns achieved by Australian and Canadian super funds pointed to a potential solution.
“We need to push for the consolidation of the fragmented defined contribution pensions plans nationwide,” he wrote. “Likewise, requirements on local government to pool their pension funds need to be properly implemented. Insurance company regulation needs to permit investment into more growth assets.”