With new Sebi rule on voting action and reasons, may turn to specialist agencies to manage these, to save time for core job.
Some leading fund houses are planning to outsource the process of voting on important company resolutions to professional agencies.
Mutual funds have come under increased scrutiny after the Securities and Exchange Board of India (Sebi) recently asked them to disclose their voting action in company resolutions. Many fund managers feel it is not feasible to actively participate in thousands of company resolutions every year.
“Last year, there were some 5,000 resolutions in our portfolio companies. If the fund manager has to go into each company and every resolution, he will not be left with any time for managing the fund. Globally, there are professional agencies which monitor governance standards in companies and vote accordingly,” said the equities head of a top-3 fund house.
He said he had got proposals from a couple of agencies . “We are considering these proposals. This is the way forward,” he added.
Globally, Institutional Shareholder Services (ISS), a subsidiary of MSCI Inc and Manifest and Pensions Investment Research Consultants (Pirc) are among agencies which help large institutional clients actively participate in company resolutions and corporate governance issues.
These agencies manage clients' proxy ballots, work with custodian banks, execute votes on clients' behalf, maintain vote records and provide comprehensive reporting, according to their websites. They also support fund houses through various decision support tools.
Institutional investor activism has gained the focus of regulators in India after the multi-crore fraud in Satyam Computer Services was discovered in early 2009. Despite having a huge institutional investor holding, the company was carrying a huge cash balance in its balance sheet for several years.
After Sebi made it mandatory for fund houses to make public their 'voting policy' and also their votes, the disclosures show that ICICI Pru abstained from all voting on proposals put to vote, barring those by three public sector lenders -- Canara Bank, UCO Bank and Union Bank. It did not vote against a single proposal of the companies where it had invested. The country's largest fund, Reliance MF, voted in favour of a vast majority of the proposals. In some cases, it abstained from voting. However, Reliance MF also did not vote against a single proposal.
The disclosures of a host of other fund houses, including UTI, SBI, HDFC, Bharti AXA, Birla Sunlife, Sahara and Quantum Mutual Fund, show a similar pattern, where the funds have mostly voted either in favour of the proposals made by the companies or had abstained.
The disclosures showed only a few instances of voting against a proposal. According to reports, Sebi is considering certain changes in its rules and might ask the funds to be more specific, including reasons behind their voting decisions, especially when abstaining from a vote.
