Thu, Jul 31, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Governance and performance research show it pays to be good

Wednesday, November 13, 2013
Opalesque Industry Update - PIRC, Europe’s largest independent governance research specialists and Inalytics, who measure investment skill, have announced a new collaborative service to allow pension funds to assess their portfolios for both governance risk and investment skill.

The service has grown from Inalytics Research Paper 08 which demonstrated that firms who practise good governance have outperformed the market over the past two years.

The research paper reveals the marked impact of governance on performance. Of the 423 portfolios analysed, firms ranked as high risk by PIRC underperformed the index by an average of 4.1% over a 23 month period. The beneficial effect of good governance is much more potent; firms ranked as ‘low-risk’ by PIRC outperformed the index by 13.1% on average.

The research revealed that the relationship between governance and performance is felt particularly acutely for smaller companies. Small low-risk firms outperform the index by 15%, medium risk by 8.5% and high risk firms underperformed by 0.4%.

The new service is provided by Inalytics, enhancing its existing service of benchmarking manager skill by incorporating PIRC’s Corporate Governance Ratings for every quoted company in the UK, the USA and Europe.

The new service gives Pension Funds two powerful tools to examine their portfolios to see whether they own companies that are high risk, while knowing if their Managers have the investment ability to meet their performance targets.

Rick Di Mascio, CEO of Inalytics, said: “We believe that PIRC’s governance ratings will be a significant value enhancing addition to our manager skill analysis. Our clients can now correlate governance risk with manager skill assessments in their equity portfolios. This research will help pension funds understand the tangible effect that governance is having on their investments.”

Alan MacDougall, PIRC’s Managing Director, said: “We are delighted to be working with Rick and his team to combine our strengths, and have long been admirers of the work Inalytics undertakes. We believe this service is absolutely unique, and marks a significant step in bringing an objective assessment of governance risk into mainstream portfolio analysis and construction.”

PIRC’s Corporate Governance Ratings offer an independent view of where governance risks may be embedded within a company or portfolio. The Ratings provide an assessment of the presence or absence of particular governance structures and policies which have a material impact upon the company’s performance. The Ratings draw on approximately 100 data points, covering four main areas: audit and reporting; the board; executive pay; and shareholders and capital.

Inalytics has featured on Opalesque before. You can read that piece here.

Press release

bc

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing
  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Opalesque Exclusive: Kyria Capital Management bets on women hedge fund managers[more]

    Bailey McCann, Opalesque New York: As hedge fund assets top $3 trillion, and long/short strategies get more crowded than ever, with every manager hunting for even the tiniest bit of alpha, a new firm has emerged that claims its own edge – women. A recent Rothstein Kass study showed women-owned a

  2. Hedge fund manager Winton Capital making headway with long-only strategy[more]

    From PIonline.com: North American investors are helping Winton Capital Management Ltd. make progress — albeit slowly — toward its founder's goal of becoming a $100 billion company. The firm's ticket to quadrupling its assets under management is unlikely to be one of its scientifically designed manag

  3. Opalesque Roundtable: Success in hedge fund marketing not linked to performance, but investor appetite[more]

    Komfie Manalo, Opalesque Asia: Success in marketing a fund is not linked to the performance, but to investor appetite, to the way you can market the fund, and to how much time you can spend to raise assets, said Antoine Rolland, the CEO of incubator and seeding firm

  4. Opalesque Radio: Now is a good time to buy protection cheaply in the options market[more]

    Benedicte Gravrand, Opalesque Geneva: Investors are showing an increased interest in risk parity funds and strategies, Opalesque reported last year. Risk parity strategies have the

  5. The Big Picture: Charlemagne Capital smoothes risk out of frontier market investing with portfolio approach[more]

    Benedicte Gravrand, Opalesque Geneva: Opalesque recently talked to one of the portfolio managers of the Oaks funds, which are emerging and frontier market hedge funds focusing on equity long/short with a directional approach. They are run by