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Our Approach to Equity Investing Generation to the Next)
VIEWPOINTS OCTOBER 2015, ISSUE 2 Our Approach to Equity Investing The ongoing debate between active versus passive management (also called “indexing”) in the context of equity investing may never be fully resolved. While the purpose of this Viewpoints is not an attempt to resolve the debate, we will briefly touch on the differences between these two approaches and the reasoning behind our approach to equity investing. At Houston Trust Company, we believe both approaches have merit, and each may be useful in achieving a given client’s needs and overall portfolio objectives. However, for the vast majority of our clients, we believe core holdings of high-quality, individual stocks managed (at reasonable cost) by independent, third party investment professionals offers a greater degree of flexibility, control and transparency, and can deliver competitive returns over long periods of time with lower volatility than passively managed index mutual funds. Indexing and Active Equity Active equity management, in contrast to indexing, Management Defined seeks to exploit perceived market inefficiencies in an attempt to outperform the underlying index, or In theory, passive equity investing entails simply benchmark, over time. The degree of outperformance replicating the holdings in an underlying index by is commonly referred to as a manager’s “alpha” purchasing the same securities in the same weights (i.e. the value-added return in excess of the appropriate as the index. In practice, however, what the investor benchmark which is attributable to the manager’s actually owns is a financial instrument, the return of skill). In simple terms, long-only active equity which reflects the return of the particular index (S&P managers will attempt to earn positive excess returns 500, EAFE, etc.) that the instrument is designed to by overweighting underpriced securities/industry replicate. -
2020 Us Policymaker Esg Primer
2020 U.S. POLICYMAKER ESG PRIMER DECEMBER 2020 About Paul, Weiss’s sustainability and ESG advisory practice Paul, Weiss, Rifkind, Wharton & Garrison LLP is a firm of 1,000 lawyers who provide innovative and effective solutions to our clients’ most complex legal and business challenges. Our sustainability and environmental, social and governance (ESG) advisory practice helps boards and executives navigate the legal, business and political ramifications of developing and implementing sustainability and other ESG initiatives. We advise on ESG-focused stakeholder engagement, corporate governance, crisis management, corporate social responsibility, sustainability, diversity and inclusion, ethics and compliance. For more information visit paulweiss.com/practices/sustainability-esg. This Primer is not intended to provide legal advice, and no legal or business decision should be based on its content. About Refinitiv Refinitiv is one of the world’s largest providers of financial markets data and infrastructure, serving over 40,000 institutions in approximately 190 countries. It provides leading data and insights, trading platforms, and open data and technology platforms that connect a thriving global financial markets community – driving performance in trading, investment, wealth management, regulatory compliance, market data management, enterprise risk and fighting financial crime. Report authors Barnabas Acs, Ph.D., Global Business Development Director, Sustainable Finance, Refinitiv Mark S. Bergman, Partner, Paul, Weiss, Rifkind, Wharton & Garrison -
HSBC Asset Management – UK Stewardship Code Report 2020 1
HSBC Asset Management UK Stewardship Code Report 2020 Foreword We welcome the UK Stewardship Code 2020, which we have applied during the course of 2020. We were early signatories to the first Stewardship Code and recognised the ISC Statement of Principles which preceded it. Our stewardship is an important expression of our fiduciary responsibility to our clients. We believe that deep consideration of environmental, social and governance (ESG) issues and commitment to active stewardship is integral to sound investment decisions that will deliver sustainable returns to our clients. I hope that this statement will give clients and other stakeholders a good understanding of how we have applied the Code. The COVID-19 pandemic meant that 2020 was an extraordinary year. The impact of the pandemic was the focus for much engagement but did not divert investors and companies from significant progress in addressing other systemic risks such as climate change. As we emerge from the Covid-19 crisis, we support the call to build back a better, more inclusive and sustainable world. There is much to be done to achieve these goals, and we are committed to playing our part. We will continue our active stewardship, incorporating ESG factors in our investment process and creating long term value for our clients, supporting the transition to a more sustainable economy and society. Joanna Munro, Chief Investment Officer HSBC Asset Management – UK Stewardship Code Report 2020 1 |PUBLIC| PURPOSE & GOVERNANCE Principle 1 Signatories’ purpose, investment beliefs, strategy, and culture enable stewardship that creates long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society. -
Comparison of Risk Adjusted Returns in Core-Satellite Portfolios: Changing the Conversation to Benefit the Smaller Investor by J
Comparison of Risk Adjusted Returns in Core-Satellite Portfolios: Changing the Conversation to Benefit the Smaller Investor by John A. Molster, Jr. A dissertation submitted to the faculty of Wilmington University in partial fulfillment of the requirements for the degree of Doctor of Business Administration Wilmington University October 2018 Comparison of Risk Adjusted Returns in Core-Satellite Portfolios: Changing the Conversation to Benefit the Smaller Investor by John A. Molster, Jr. I certify that I have read this dissertation and that in my opinion it meets the academic and professional standards required by Wilmington University as a dissertation for the degree of Doctor of Business Administration. Signed ___________________________________________________ John L. Sparco, Ph.D., Chairperson of Dissertation Committee Signed ___________________________________________________ Ruth T. Norman, Ph.D., Member of the Dissertation Committee Signed ___________________________________________________ Mary B. Lavoie, D.B.A., Member of the Dissertation Committee Signed ___________________________________________________ Kathy S. Kennedy-Ratajack, D.B.A. Dean, College of Business Table of Contents List of Tables .................................................................................................................... vii List of Figures .................................................................................................................. viii Dedication ......................................................................................................................... -
Reprisk the Leading Research Tool to Help You Flag, Assess, and Monitor ESG Risks in Your Business
An introduction to RepRisk The leading research tool to help you flag, assess, and monitor ESG risks in your business RepRisk AG Zurich, Switzerland February 2018 RepRisk AG, Zurich, Switzerland | www.reprisk.com | RepRisk® is a registered trademark. RepRisk delivers leading research solutions to mitigate ESG and business conduct risks § RepRisk is a pioneer in ESG and business conduct risk research and business intelligence § 1998: Founded as a risk consultancy serving the financial sector § 2006: Launch of the RepRisk Platform as a due diligence solution to help firms identify, assess, and monitor risks and violations of international standards in their business § Today: Runs the world’s most comprehensive database on ESG risks, serving 200+ clients globally – and the only provider to cover private companies and projects in developed, emerging and frontier markets. § Headquarters in Zurich, with offices in Berlin, Manila, and Toronto 2 RepRisk serves clients worldwide – helping them prevent and mitigate ESG risks in their business PRIVILEGED 3 Our framework: ESG risks can materially impact a firm’s social license to operate and its bottom line Business conduct risks Environmental Social Governance Pollution, waste, Human rights abuses, Corruption, bribery, climate change labor, discrimination tax evasion, fraud Compliance risks Reputational risks Financial risks PRIVILEGED 4 Our research approach: It’s not enough to look at policies – you must look at performance There are two sources of information used to assess a company: RepRisk: Outside-in perspective Other providers: Inside-out focus § Focuses on performance § Focuses on intention § Based on media, stakeholders, § Based on a company’s own self- and public sources reporting, such as: external to a company § Sustainability or CSR Reports § Provides a timely and § effective “reality check” Company website about what is happening on-the- § Company Code of Conduct ground, i.e. -
Active Management and Market Efficiency: a Summary of the Academic Literature
Active Management and Market Efficiency: A Summary of the Academic Literature Executive Summary This paper reviews the empirical evidence on trends in market efficiency in the United States and the role that active management plays in creating market efficiency. Efficient markets are among the cornerstones of developed economies. In an efficient market the prices of securities, on average, reflect the value of the assets underlying the securities. More efficient markets have three primary advantages: they encourage broader investor participation, they make diversifying risk easier and they encourage capital formation. Active management is the driver of market efficiency. Active managers perform research on issuers, analyze assets underlying securities and assess values. Through the buying and selling process, active managers establish the market prices for securities. By contrast, passive managers are usually “price takers” rather than “price makers.” Therefore, in the broadest terms, an increase in the amount of active management will lead to greater market efficiency, while an increase in passive management will reduce market efficiency. A body of academic literature studies how the increase in passively-managed assets – and the concomitant decrease in actively-managed assets – has affected market efficiency. Taken together, these studies suggest that: pricing efficiency has declined, return comovement has increased, securities prices are more volatile, liquidity has decreased and liquidity exhibits greater comovement. We believe that additional studies covering the most recent periods would be useful, as would studies that take a comprehensive view of indexing and that study the effect of indexing on IPOs. ACTIVE MANAGEMENT COUNCIL WHITE PAPER / MARKET EFFICIENCY: A SUMMARY OF THE ACADEMIC LITERATURE Introduction Efficient markets are among the cornerstones of developed economies. -
Most Environmentally and Socially Controversial Companies of 2010 Zurich, December 15, 2010 / Karen Reiner
Most Environmentally and Socially Controversial Companies of 2010 Zurich, December 15, 2010 / Karen Reiner According to the reputational risk radar RepRisk, the top ten most environmentally and socially controversial multinational companies in 2010 were: 1. Transocean Ltd 6. Chevron Corp 2. BP PLC 7. BG Group PLC 3. Vedanta Resources PLC 8. Royal Dutch Shell 4. ExxonMobil Corp 9. Sinar Mas Group 5. Foxconn Electronics Inc 10. Magyar Aluminium (MAL) Companies on the list have been severely criticized by the world’s media, governmental organizations and NGOs for issues including human rights abuses, severe environmental violations, impacts on local communities, corruption and bribery, as well as breaches of labor, and health and safety standards. Rankings are based on the Reputational Risk Index (RRI), as measured by RepRisk throughout 2010. The RRI is directly derived from the negative pr ess captured by RepRisk and its calculation is strictly rule-based. RepRisk does not measure a firm's overall reputation. Instead, by capturing criticism, RepRisk computes a firm's exposure to controversy and therefore provides an indicator for reputational risk. RepRisk is used by asset owners and asset managers, commercial and investment bankers, supply chain managers, and corporate responsibility experts. The Reputational Risk Index (RRI) ranges from zero (lowest) to 100 (highest) and its calculation is based on the reach of news sources, the frequency and timing of news, as well as its content, i.e. severity and novelty of the issues addressed. The RRI is an indicator of a company's exposure to controversial issues and allows an initial assessment of risks that are attached to investments and business relationships. -
Swiss Asset Management Study 2020 an Overview of Swiss Asset Management
1 Inhaltsverzeichnis Inhaltsverzeichnis Swiss Asset Management Study 2020 An Overview of Swiss Asset Management Editors Jürg Fausch, Thomas Ankenbrand Institute of Financial Services Zug IFZ www.hslu.ch/ifz 1 Table of Contents Swiss Asset Management Study 2020 Table of Contents Preface 2 Executive Summary 3 1. Definition & Framework of Asset Management 5 2. The Swiss Asset Management Environment 12 3. Asset Management – An International Perspective 39 4. Asset Management Companies in Switzerland 47 5. Active versus Passive Investing – A Differentiated View on a Heated Debate 69 6. Conclusion & Outlook 77 7. Factsheets of Asset Management Companies in Switzerland 78 Authors 108 References 109 Appendix 120 2 Swiss Asset Management Study 2020 Preface The asset management industry is a growing segment of the Swiss financial center and offers a differentiating value proposition relative to private banking and wealth management. The strong expertise in asset manage- ment is highly relevant for Switzerland since it helps to diversify and complete the Swiss financial center. In this regard, the Asset Management Association Switzerland has the goal to further establish Switzerland as a leading provider of high quality asset management services and products domestically and abroad. In this context, the following study provides a comprehensive overview of the current status and various develop- ments in the Swiss asset management industry and consists of two parts. The first part starts with Chapter 1 in which a definition of asset management is provided and the methodological framework of the study is outlined. Chapter 2 gives an overview of the environment and discusses the political/legal, economic, social and technolog- ical developments relevant for the asset management industry. -
Large Cap Equity Fund
North Carolina Supplemental Retirement Plans Annual Review FEBRUARY 2013 Table of Contents • Defined Contribution Trends – Streamlining Investment Choices – DC Spend Down • Service Provider Disclosures – ERISA 408(b)(2) Regulations • Fee Review – NCSRP Fees – Stable Value Fund Fees • GoalMaker Discussion (Separate Slides) • Considering Other Fund Lineup Options • Fund Performance Review •Disclaimer MERCER 1 Defined Contribution Trends Trends for Large Plan Sponsors • Streamline number and types of investments offered – Combine style-specific (value/growth) choices for participants - Removes need to rebalance among styles - One fund choice that includes multiple underlying strategies across the style spectrum • Focus on retirement income MERCER 3 Streamlining Investment Choices • Research has shown that participants are neither good at making their own investment choices nor happy about this responsibility • Limited participant understanding remains one of the most significant challenges for plan sponsors • Plan sponsors are looking to: – Reduce redundant investment choices – Blend styles and managers – Lower risk for participants • Offering limited options allows clear and simple communication of plan • Allows each participant to create a portfolio that fits their risk tolerance and time horizon MERCER 4 Custom Funds Sample Large Cap Multi-Manager Structure Large Cap Equity Fund • Combining strategies with low or negative excess return correlations are expected to reduce the Index tracking error and increase the fund’s expected 5% information -
The Structure and Performance of the Money Management Industry
JOSEF LAKONISHOK Universityof Illinois at Urbana-Champaign ANDREI SHLEIFER Harvard University ROBERT W. VISHNY Universityof Chicago The Structure and Performance of the Money Management Industry IN 1990 TOTAL FINANCIAL assets in U.S. capital markets amounted to $13.7 trillion, of which $3.4 trillion was equities, and the rest were bonds, government securities, tax-exempt securities, and mortgages. These financial assets were held by two principal types of investors: individuals and institutions. The New York Stock Exchange defines an institution as a firm that employs professionals to manage money for the benefit of others (firms or individuals). At the end of 1990, $6.1 trillion of the total U.S. financial assets was held by institutions. Both the amount of institutional assets and the fraction of the total they represent have increased sharply over the past 30 years. In 1950, for example, institutional assets comprised $107 billion out of a $500 billion total, or 21 percent compared with 45 percent in 1990.1 The growth of institutional ownership of equities has paralleled their growth in the ownership of other financial assets. In 1955 institutions owned 23 per- cent of equities compared with 77 percent owned by individuals; in We thankSEI Corporationand Denise Handwerkerfor providingthe dataand Gilbert Beebower,Michael Duncan, Vasant Kamath, Christopher Schwartz, and Ron Skleneyfrom SEIfor theirinsights. We wouldalso like to thankGene Fama, Oliver Hart, Stewart Myers, GeorgePerry, Jay Ritter,and JeremyStein for helpfulcomments and Peng Tu and Randy Pollackfor researchassistance. Computing support was providedby the NationalCenter for SupercomputingApplications, University of Illinois at Urbana-Champaign. 1. These numbers are from the Institutional Investor Fact Book published by the New York Stock Exchange.Jean Tobin of the NYSE kindlyprovided the latest figures. -
Active Vs. Passive Portfolio Management
Page 1 of 2 Oppenheimer & Co. Inc. Jeff Ahrens Director - Investments 580 California Street, 23rd Fl San Francisco, CA 94104 (415) 438-3076 [email protected] http://fa.opco.com/jeffahrens Active vs. Passive Portfolio Management One of the longest-standing debates in investing is over the company and its securities, it's difficult if not impossible to gain relative merits of active portfolio management versus passive an advantage over any other investor. As new information management. With an actively managed portfolio, a manager becomes available, market prices adjust in response to reflect tries to beat the performance of a given benchmark index by a security's true value. That market efficiency, proponents say, using his or her judgment in selecting individual securities and means that reducing investment costs is the key to improving deciding when to buy and sell them. A passively managed net returns. portfolio attempts to match that benchmark performance, and Indexing does create certain cost efficiencies. Because the in the process, minimize expenses that can reduce an inves- investment simply reflects an index, no research is required for tor's net return. securities selection. Also, because trading is relatively infre- Each camp has strong advocates who argue that the advan- quent--passively managed portfolios typically buy or sell secu- tages of its approach outweigh those for the opposite side. rities only when the index itself changes--trading costs often are lower. Also, infrequent trading typically generates fewer Active investing: attempting to add value capital gains distributions, which means relative tax efficiency. Proponents of active management believe that by picking the Popular investment choices that use passive management are right investments, taking advantage of market trends, and at- index funds and exchange-traded funds (ETFs). -
Reprisk Special Report Deep Sea Extractive Activities: Seabed Mining and Deep Sea Drilling
ESG Business Intelligence RepRisk Special Report Deep Sea Extractive Activities: Seabed Mining and Deep Sea Drilling June 2015 Foreword from the CEO I am pleased to announce the release of our Deep Sea Extractive Activities Report, which focuses on the challenges facing Seabed Mining and Deep Sea Drilling. The scientific community is slowly recognizing that the deep-sea marine environment harbors complex and diverse ecosystems that can potentially benefit mankind. Pharmaceutical companies also believe that the deep-sea may provide resources for the discovery of new medicines derived from natural products. Exploration of the deep-sea marine environment is in its infancy, and many discoveries undoubtedly remain to be made. Commercial overfishing and pollution have already harmed the world’s oceans, and the interest to exploit mineral and oil deposits in deep-sea locations has raised concerns that these fragile marine ecosystems will be irrevocably damaged before scientists have had time to explore their full potential. Scientists and civil society organizations are urging companies to consider the cumulative impacts of their extraction in their risk management strategies, and are calling for an international consensus on the protection of the marine environment. We hope that this report sheds some light on the scale of the challenges facing companies that want to explore the commercial potential of deep-sea environments and will increase awareness of the ESG risks involved in such activities. Philipp Aeby CEO, RepRisk AG About RepRisk RepRisk is a leading business intelligence provider specializing in dynamic environmental, social and governance (ESG) risk analytics and metrics. On a daily basis, RepRisk systematically screens big data from a broad range of open intelligence sources in 15 languages in order to identify, filter, analyze and quantify ESG risks (such as environmental degradation, human rights abuses and corruption) related to companies, projects, sectors and countries.