Sun, Feb 14, 2016
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. Asia - Hedge fund manager Kyle Bass estimates China's foreign reserves below critical level[more]

    From Nasdaq.com: Investor Kyle Bass stepped up his attack on China's currency, arguing in an investor letter distributed Wednesday that the second-largest economy's foreign reserves are "already below a critical level." The comments mark the latest effort by hedge funds and other investors to raise

  2. Investing - Some hedge funds want to make subprime auto loans next big short, 11 hedge funds that are “all in” on the FANG stocks, Hedge funds short London luxury homes, Cynet raises $7 million from U.S. hedge fund[more]

    Some hedge funds want to make subprime auto loans next big short From Bloomberg.com: A group of hedge funds, convinced they have found the next Big Short, are looking to bet against bonds backed by subprime auto loans. Good luck finding a bank willing to do the trade. Money manage

  3. Investing - Hedge funds see selloff in European bank stocks as buying opportunity[more]

    From WSJ.com: The massive selloff in European bank stocks and bonds is overdone and presents a “phenomenal” buying opportunity, according to some of Europe’s top hedge-fund managers. Despite a 28% slump in European bank stocks this year, including a 38% fall in Deutsche Bank AG and a 34% drop in Soc

  4. Legal - Carlyle accused of fraud by ex-employee, Hedge funds win CDS breach of contract suit against Deutsche Bank, Hedge fund asks for OK on $27.5m Goldman CDO deal, SFO examines Barclays hedge fund profits[more]

    Carlyle accused of fraud by ex-employee From AI-CIO.com: A former portfolio manager claims he was fired for blowing the whistle on “crazy” and “irresponsible” investments. Carlyle Group has been sued by a former portfolio manager for one of its hedge funds, who accused the firm of “knowi

  5. Illiquid assets are all the rage for hedge funds[more]

    From Valuewalk.com: …Institutional investors are increasingly turning to illiquid assets and active management strategies to combat macroeconomic trends, anticipated market volatility and diverging monetary policy, according to a new survey by Blackrock. And this week, Bloomberg has reported that at