Abstract
Orientation: Compromised global trust levels appears to be one of the lasting legacies of the 2007 financial crisis, also in the financial services industry. In order to rebuilt trust, it is not only important to identify the drivers of trust, but also to assess the contexts within which trust is cultivated. Research purpose: The researchers investigated the impact that this announcement and a subsequent apology by Futuregrowth’s chief investment officer (CIO) had on trust in the asset management sector. Motivation for the study: Trust could be compromised when investors publicly engage with investee companies on contentious issues. As most investor activism in South Africa takes place in private, a unique research opportunity presented itself when Futuregrowth Asset Management publicly announced that they would suspend their funding to six state-owned enterprises (SOEs). Futuregrowth is the biggest private fixed-income asset manager in Africa and is renowned as a responsible investor. Research approach/design and method: Content analysis was performed on 31 articles published in financial newspapers and magazines. In addition, semi-structured personal interviews were conducted with the CIO of Futuregrowth, another member of his team and six prominent local asset managers. Main findings: The findings suggest that asset managers who wish to engage with investee companies in South Africa, especially SOEs, should preferably do so in private as a first recourse. When they do decide to speak out in public, they should focus on maintaining both calculative and affective trust. Failure to recognise the importance of affective trust, especially during periods of socio-political and economic uncertainty, could jeopardise trust in the asset management sector. Practical/managerial implications: The evidence suggests that affective trust is increasingly important in the chosen sector. Asset managers should no longer only focus exclusively on credibility, reliability and competence but should also give due consideration to the affective trust elements of integrity and fairness. Contribution/value-add: The findings are particularly pertinent in countries with small stock exchanges and high degrees of director interlocking. The research methodology adopted in this study represents a novel contribution to research in the asset management field.
Highlights
The structure represents the findings of the content analysis, the interview with Canter and his colleague and the interviews with the six asset managers, respectively
Journalists stressed the fact that Futuregrowth had a mandate to make ‘independent investment calls on behalf of its clients’ and that they had ‘the right to question’ governance at state-owned enterprises (SOEs) and other investee companies
It is clear that the asset manager wanted to make an unequivocal statement about fiduciary duty and sound corporate governance
Summary
‘It is in your hands to create a better world for all who live in it’. This quote by the late Nelson Mandela seems at odds with the current reality in South Africa where politicians and business leaders are increasingly acting in their own best interests. It has been argued that trust is best developed and nurtured when investors and their appointed asset managers engage with investee companies in private (McNulty & Nordberg 2016) This is true in countries with small stock exchanges and a high level of director interlocking. It can be argued that both calculative and affective trusts are essential in building and maintaining high levels of trust in the asset management sector. Prior studies provide significant evidence confirming the relationship between satisfaction and trust (Garbarino & Johnson 1999; Leisen & Hyman 2004), in the financial services industry (Román 2003). This relationship occurs because the detection of similarity in others confirms an individual’s interpretation of the environment, which, in turn, provides an environment conducive for the development of trust (Johnson & Grayson 2005)
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