Conversation with 2021 ICI Chair

Your tenure as ICI chair has coincided with a period of sweeping changes on many fronts, including the COVID-19 pandemic, social and political transformations, and continuing advances in technology. How well positioned are ICI and the fund industry in addressing these changes?

The fund industry has never been better positioned to serve investors and shareholders. We have seen a sea of changes across the industry, and the industry has adapted, has expanded, and continues to deliver more to shareholders and investors today than ever before.

ICI has played an important role in providing support for this continued success of the mutual fund industry—working with Capitol Hill and regulators to help shape oversight and protecting the interests of our shareholders and the industry. This has been a pretty phenomenal period of time and ICI has done so much—working with the SEC [Securities and Exchange Commission] and other regulators under the leadership of Paul Stevens and now Eric Pan.

ICI’s focus starts with the same core focus of the asset management industry—doing the right thing for the long-term interests of investors in our funds and for shareholders.

There have been many accomplishments, including the expansion of e-delivery of shareholder reports; improved disclosure regimes and standards; fair tax treatment, particularly with the ETF [exchange-traded fund] proposal; in-kind redemption; and fair tax for the private retirement system. Additionally, there are a number of engagements ICI has had with the SEC and others around the derivatives, valuation, and liquidity rules, where ICI has ultimately improved the outcomes. And then I think one of the most exciting areas are the working groups ICI has put together on ESG [environmental, social, and governance investing] and money market funds. These are both key issues and ICI’s engagement is going to help shape regulatory structures for a long time to come.

It’s important to remember that much of this occurred during the COVID-19 pandemic—ICI and member firms moved to working virtually in a very short period of time, and were still able to meet their commitment to shareholders, while helping regulators and other industry participants develop rules to allow funds and their boards to operate in a virtual environment.

Now we’re moving on to the next chapter, and we are really well positioned for the future. Eric Pan, a veteran markets regulator with deep experience in international financial regulation, is at the helm of ICI, and Yie-Hsin Hung was recently announced as the new chair of ICI, the first woman to ever hold that position. It’s really exciting to have her perspective brought to bear on the industry.

Since the pandemic-related market turmoil of March 2020, policymakers around the world have been examining the causes and weighing policy reforms in response. What role did ICI play during the turmoil, and how has ICI contributed to the discussion since?

ICI has played a really critical role here, going back to the earliest days—when the markets were experiencing incredible volatility and intense demand for liquidity.

As policymakers worked to calm the markets, the Institute worked very quickly to convene members to engage closely with the Federal Reserve and Treasury, urging them to adjust some of the Fed’s emergency liquidity facilities. ICI was also instrumental in getting the SEC staff to provide relief, so that members could continue to manage liquidity during those challenging market conditions.

I believe ICI is the most effective trade organization in Washington. Frankly, it’s the only effective representative of everyday investors—Main Street investors.

The crisis has certainly subsided since. But the long-term policy stakes remain high, especially for money market funds. And given the important role of money market funds in the financial system, ICI has urged policymakers to evaluate reform options to mitigate unintended consequences—in other words, preservation of their key characteristics—against the likely practical impact any money market fund reforms will have on making the overall financial system more resilient. Any new reforms for money market funds must be measured and appropriately calibrated, and take into account the costs and benefits these funds provide to investors, the economy, and the short-term funding markets.

In the wake of crises, ICI’s approach has always been to engage members, policymakers, and other experts—to talk through lessons learned and construct thoughtful, pragmatic responses. That spirit certainly shined through here.

Interest in ESG investing has also taken off in recent years. What are some of the biggest challenges facing funds as ESG investing becomes more prevalent? Tell us about ICI’s efforts to be at the forefront of this rapidly evolving issue.

This is an incredibly important topic for every industry—not just ours—and it’s an issue that is evolving rapidly. But, as with any emerging topic, there are both challenges and opportunities. It’s a complex area and there is confusion about what ESG investing is and is not. And it’s not just complicated for end clients, but also for media, regulators, and policymakers.

So, I think one of the most important initiatives we took was creating a member ESG working group to tackle these challenges. For example, the ESG working group analyzed ESG taxonomy—a common language that the industry and others can use to describe what we’re actually doing. We also convened the working group to call on the SEC to require companies to disclose greenhouse gas emissions and workforce diversity information in a clear, consistent, comparable manner. This built on the work done by the Board of Governors, which came together to unanimously encourage companies to report climate-related data consistent with the recommendations of the TCFD [Task Force on Climate-Related Financial Disclosures] and the standards of the SASB [Sustainability Accounting Standards Board]. And most recently, the Board issued a statement on financing the transition to net zero, identifying specific actions the fund industry can take to facilitate the economic transition to net zero emissions and meet investors’ objectives.

ICI plays a really important role as an objective, fact-based facilitator on some of the industry’s most important issues.

We’ve also been actively engaged in the global arena, supporting the work of the IFRS [International Financial Reporting Standards] Foundation to advance globally accepted sustainability reporting standards, calling for a governance structure that appropriately represents the interests of investors and coordinating among international policymakers to facilitate cohesive baseline disclosure of sustainability information that is material to enterprise value creation.

ICI is better positioned than almost anyone to help regulators, the media, and investors better understand this rapidly evolving space.

Events over the past two years have also sparked renewed commitments to greater diversity and inclusion (D&I). Tell us a little about how ICI and the fund industry have made this goal a top priority.

It’s great to see the industry working hard toward this goal. It’s not only the right thing to do, it’s also a commercial imperative for the industry to reflect the perspectives and composition of the clients and shareholders that we serve.

The ICI Board of Governors created a board-level D&I working group that I had the honor of chairing. There were two very important priorities. First, data—we need to measure progress to make progress. We initiated an employee survey to improve our understanding of the demographics of our industry, and now we have a standard on which to measure our progress. I’m really excited about that. The other priority is to promote ways ICI can help the industry expand and broaden our recruiting efforts, and create a pipeline of diverse talent at all levels. And there are a number of initiatives that ICI has taken to advance this.

Listen, this is not an easy topic, and it’s not one that’s going to be solved in the short term, but we are squarely on a journey to make progress, to measure it, and to find ways that ICI and the industry can set standards and best practices for people to emulate.

As you close out your third and final year as ICI chair, what would you like to communicate about ICI to members?

The fund industry is changing rapidly. There is so much opportunity for our shareholders and for our businesses. ICI is also changing, evaluating the mission and strategy required to best serve shareholders in a changing world. It’s incredibly gratifying to see the level of interest across the ICI Board of Governors and the strength the Board sees in ICI—both in the role it has played and the role it can play going forward.

I’m tremendously excited about the future of ICI and the role that it will play for my business and for the industry. It’s really important work. The work we do today for individual investors and retirement security is more important than it ever has been, and ICI is going to play an important role in continuing to support those efforts.

What do you think distinguishes ICI from other organizations like it in the world?

I believe ICI is the most effective trade organization in Washington. Frankly, it’s the only effective representative of everyday investors—Main Street investors. ICI serves more than 200 member firms and more than 31,500 funds, with more than $42 trillion in assets, and represents the interests of more than 100 million shareholders in the United States and beyond. That’s extraordinary. And ICI’s focus starts with the same core focus of the asset management industry—doing the right thing for the long-term interests of investors in our funds and for shareholders. ICI plays a really important role as an objective, fact-based facilitator on some of the industry’s most important issues. The research and policy analysis done by ICI is the best there is for retirement and investment issues. ICI is credible on the Hill, credible with regulators, and key to advancing sound policies for our industry. It’s a great organization with a great culture, and I’m proud to be a part of it.