Institutional investors: here today, gone tomorrow?

Article Abstract:

Institutional investors in the UK have turned over the management of their investments to investment managers who are more interested in short-term strategies than in the long-term health of the firms they invest in. This situation has arisen because institutions no longer exercise tight control over their investment managers, preferring to allow them flexibility. Institutions judge the performance of investment managers through their financial returns, which exacerbates a short-term view. UK companies need investment geared towards long-term results, and proposals have been advocated to reduce short-term investment though such venues as taxing short-term capital gains. The problem lies in the commission structure of investment managers and could be remedied by replacing commissions with fee-based remuneration that promotes professional management services emphasizing service and involvement rather than short-term gains.

Investment advisers, Institutional investments

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Foreign exchange transactions: maintaining internal control

Article Abstract:

A high level of internal control is necessary for the execution of foreign exchange transactions in corporate treasuries. A Touche Ross survey of 41 public companies from the top 250 in the UK reveals that most corporations are not operating their corporate treasury operations as profit centers, indicating that firms typically are not taking speculative positions in the foreign exchange markets. The survey does reveal weaknesses in the areas of segregation of responsibilities for internal control and performance measurement. Corporate treasuries must implement controls over the types of instruments that treasurers are allowed to use. The small size of most corporate treasuries makes segregation difficult, but not impossible, and segregation should be implemented.

Management, Accounting and auditing, Surveys, Foreign exchange, Internal auditing, Touche Ross and Co.

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