Asset managers concerned about unethical behaviour, asset mispricing

CFA Institute members were asked how they think the pandemic will affect capital markets

female advisor with laptop

Almost half of investment managers in Canada believe the Covid-19 crisis will lead to unethical behaviour in the investment management industry, according to a global survey from the CFA Institute.

The survey found that 45% of Canadian CFA members said they were worried about an increase in unethical behaviour in the wake of the pandemic, while 26% were not. Twenty-nine per cent were neutral on whether Covid-19 would lead to a surge in misconduct.

“Of note, a majority thought that regulation of market conduct should not be relaxed in this crisis, which is a positive reflection of the ethical professionalism of the membership,” Olivier Fines, the CFA Institute’s head of advocacy for Europe, the Middle East and Africa, said in a release.

More than half of Canadian respondents said conduct regulation should not be relaxed to encourage trading and liquidity, and 71% said regulators should consult industry on how to respond to the pandemic.

Market liquidity was a concern for many respondents, particularly with regard to investment-grade corporate bonds. In Canada, 35% of respondents said they thought liquidity was down in corporate bonds, due in large part to central bank intervention. Only 30% of Canadian respondents thought liquidity had dropped in equity markets.

An overwhelming majority of respondents — 96% — said they thought Covid-19 would lead to asset mispricing, driven predominantly by liquidity dislocation (36%) and a distortion of market pricing due to government intervention (35%).

The majority of Canadian investment managers (almost 77%) said they were taking a wait-and-see approach before making changes to their strategic asset allocation. The remaining 23% said they have already made significant changes to their allocations.

The CFA Institute polled 13,278 of its members around the world between April 14 – 24, 2020. The results of the survey have a margin of error of +/-0.8%.