NEW YORK: A recent survey of institutional investors found that most money mangers do not typically consider third parties' corporate-governance ratings when selecting stocks for their clients' portfolios.
Over the past year, several firms, including Institutional Shareholder Services and Governance Metrics International, have begun selling such ratings to institutional investors.
A survey of 50 US-based portfolio managers conducted by investor relations firm Citigate Financial Intelligence (CFI) found that only two managers said that they use such scoring systems provided by third-party advisors in their formal stock-selection process. Only 12% of respondents said they attempt to assign their own numerical value to corporate governance.
"After speaking informally to portfolio managers, we suspected that corporate-governance ratings were not playing a significant role in their investment decisions," said Paul Hebert, MD of Citigate Financial Intelligence. "This survey proved our suspicions to be correct."