Pass-through voting is an innovation that provides investors in pooled funds with the ability to direct votes in proportion to their holdings. We partnered with the Investor & Issuer Forum to study the implications of this development in the UK institutional market.
Pass-through voting divides opinion. Critics believe that pass-through voting will weaken stewardship by: separating voting from engagement; fragmenting interactions between issuers and investors; increasing uninformed voting or increasing performative voting; and blunting signals in the market for stewardship. Advocates believe pass-through voting expands choice and helps asset owners to align voting with their investment beliefs; enriches perspectives brought into stewardship; and enhances dialogue between asset owners and asset managers. They believe concerns about pass-through voting are overblown.
We interviewed 46 executives representing 33 organisations across the UK investment chain: asset owners, asset managers, issuers, regulators, and service providers. We interviewed those that have offered or adopted pass-through voting and those that had decided not to. We were interested to understand the motivations, hopes, and concerns of market participants and to understand their perspectives. Most of all we wanted to understand the potential implications of pass-through voting for the quality of stewardship in the UK market.
While the scale of future growth of pass-through voting is highly uncertain, we conclude that the stewardship implications could be significant and highlight some best practice principles and areas for futher investigation to promote responsible adoption of pass-through voting.
You can read our final practitioner report here.
The draft academic paper can be found here.
LSE Research Team: Professor Tom Gosling and Dr Suren Gomtsyan
