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Global Factors and Portfolio Monitoring

August 29, 2017

Today’s changing markets and shifting technological landscape make it important for large institutional investors to stay informed of changes that can affect their interests. Many global factors can create opportunities as well as challenges with regard to returns. In addition, local rules and regulations can make it difficult to keep track of the procedures required to join in, or opt out of, different claims.

Global Factors for Institutional Investors to Consider

“Globalization” is constantly being redefined. As markets expand into new areas, they give rise to new legal challenges and questions. Improvements in communications, information processing, and data analysis are also changing the way that businesses and global entities interact with one another.

With the increase in global competition and exchange, it becomes more important than ever to fully consider risks and opportunities. It is important for institutional investors and other similar organizations to grasp the way that global events and large-scale, international legal developments and non-U.S. securities litigation cases can affect shareholder claims and interests.  

Some factors that investors must keep track of include:

  • The creation of entirely new sectors and industries, which can have dramatic effects on job creation and national productivity
  • Increased focus on infrastructure rebuilding
  • Cybersecurity, cyberinsurance, other “cyber” related issues
  • Continued progress in artificial intelligence, data mining, and digital progress
  • Executive pay discrepancies and other governance matters
  • Emerging markets, which are accompanied by different legal frameworks and regulatory structures

All of these factors play out differently in various parts of the world and can have a major impact on shareholder interests. Cultural influences are also an important part of the equation, as many businesses are structured around traditional social values. 

The Importance of Early Detection

Local jurisdictional differences can make it difficult for large institutional investors to keep pace with developments in a timely manner. Failure to identify claims that affect shareholder interests can have consequences such as:

  • Further exposure to securities fraud, corporate mismanagement, and fiduciary breaches, and other violations
  • Missing filing deadlines for participation in class action suits
  • Duplicated or repeated communications due to delays

Most jurisdictions have an “opt-in” procedure for class actions, rather than an opt-out method. In such jurisdictions, potential class members are required to affirmatively join the action. For opt-in class actions, courts will set specific deadlines for the potential class  participants to join the lawsuit. Missing a deadline, or not being made aware of a deadline, could result in a missed opportunity for the prospective class member to recover. 

In opt-out jurisdictions, where all potential class members are automatically included in the action, there may also be similar deadlines. Here, the potential plaintiff may miss an opportunity to sue directly if they have missed the window for opting out. An example of this is in Australia, where class members must submit a claims registration even before any settlement or judgement is announced. Thus, timely responses are important, especially when dealing with foreign rules that differ significantly from U.S approaches. 

The Increasing Need for Portfolio Monitoring Services

With such a broad range of risks and challenges to consider, institutional investors must ensure that their assets are protected and that processes are in place for reacting to actions that affect their interests. In most cases, due to time and resource constraints, the best way to accomplish this is to work with a firm that provides portfolio monitoring services. Portfolio monitoring services can provide a wide range of benefits for large investors. These include:

  • Staying informed on domestic and international fiduciary and shareholder cases
  • Being alerted to fraud, mismanagement, and other abuses that can have a negative effect on investment returns
  • The ability to object to settlement proposals as needed
  • Various other benefits

Portfolio monitoring and claims administration are complex subjects that require the oversight of experienced professionals. 

For more information on portfolio monitoring and Kessler Topaz’s proprietary Securities Tracker services, download our guide “How Kessler Topaz Approaches Portfolio Monitoring.” Our Securities Tracker services include Case Summary Reports, Online Document Access, Detailed Quarterly Reports, and various other features to keep your staff fully informed. 

Kessler Topaz’s litigation practice focuses on the prosecution of securities fraud claims brought against various public companies, including their officers and directors. Our expansive client base is comprised of more than 250 institutional investors across the globe. Contact us today for more information on portfolio monitoring and other services.