07 декабря 2017, 13:05

Can Index Funds Be a Force for Sustainable Capitalism?

Hiroshi Watanabe/Getty Images The investment industry is changing. Among other things, there is growing demand from both retail and institutional investors to align their capital with better environmental and social outcomes, and more resources going into index fund or quasi-indexing products. These two trends may seem separate—or, some people believe, incompatible—but together I believe they have the power to improve finance’s role in the world. Index funds can be a force for sustainable capitalism. Socially conscious investing is exploding as a practice and at some point I expect it to be indistinguishable as a product or service or category. All investment practices will consider environmental, social, and governance (ESG) metrics because some of those metrics are financially material, meaning decision-useful pieces of information. Just look at Uber to understand the importance of diversity and product safety or at car manufacturers scrambling to develop a competitive advantage in electric cars as countries seek to decarbonize their economics and fight pollution. In both cases, social and environmental metrics matter for the business’s financial success. This is not just case-by-case evidence. Research by my co-authors and myself has found that firms improving their performance on industry-specific, material ESG issues outperform their competitors, and firms disclosing more information on industry-specific material ESG issues exhibit more informative stock prices and as a result more efficient pricing of risks and opportunities. Index funds, meanwhile, are a cause of heated debate. Some see them as a natural evolution, and a smart choice for many non-professional investors. It is tough to beat the market and over long periods of time indexing has been shown to outperform most active managers. On the other side, fans of active management see it as a trend that can damage market efficiency and lead to distortions in market prices. If most of the market is in “passive” investment, prices won’t adjust properly and capital will be allocated less efficiently. The debate is far from settled and will likely go on for a long time. However, indexing represents an opportunity that is seldom talked about, to further the cause of sustainable investment. The opportunity is to remove incentives for free-riding within industries where a firm might take advantage of another firm’s efforts in addressing a social or environmental issue. While, overall, the evidence suggests that firms with better ESG performance outperform their competitors, there are cases where this will not be true. First, there is the “customer does not want to pay problem”: in some cases, consumers are not willing to pay more for “green” products, and in most cases only subsets of the customer base for specific products are willing to choose greener products. As a result, firms that take costly actions to source products in a sustainable way could find themselves with a higher cost structure and lower profitability margins, and as a result at a competitive disadvantage. Second, there is a time horizon problem: while in some cases increasing wages or selecting suppliers with better labor practices might bring a financial benefit in the long-term, short-term pressures on the business might make business leaders averse to making such investments. The market for corporate control, the design of executive compensation packages, and the board of directors’ evaluation horizons could be barriers to such decisions. How can we overcome these free rider problems, to make sure companies are incentivized to have a more positive societal impact? One answer, I believe, is what I call “pre-competitive collaborations,” in which industries come together to develop industry standards, generate data, create industry knowledge, or fuel product development. Before explaining how these collaborations can help, it’s important to note that we observe them already in several industries, spanning mining to technology. (These collaborations happen in a transparent way and should not be confused with the harmful collusion tactics that we should be vigilant about.) For instance, denim industry leaders in Amsterdam have come together, with the help of the Amsterdam University of Applied Sciences, to form the Alliance for Responsible Denim (ARD). The goal of ARD is to produce denim in a sustainable way by tackling the three main ecological issues the industry faces: water, energy, and chemicals. In another example, GSMA, the trade body representing mobile operators, has developed a framework to collaborate in maximizing their contribution towards the SDGs, in particular improving infrastructure, reducing poverty, providing quality education, and acting on climate. The International Council on Mining and Metals’ has developed transparency principles for mining firms while the Responsible Care program of the chemical industry focuses on outcomes ranging from employee safety to environmental impact. Similarly, the Global Agri-business Alliance is developing an agreement for companies operating in different parts of the agriculture value chain on standards of conduct for improving livelihoods of farmers, among other outcomes. By banding together, firms in an industry can make life harder for free riders who seek to act less responsibly. By setting clear standards and releasing data, these collaborations help show the market which firms are committed to ESG and which ones are shirking. But what’s the role of investors? In my research, I lay out a framework suggesting that investors are a potential mechanism to build and sustain such pre-competitive collaborations, addressing deforestation in the food industry, water pollutants in the apparel industry, material sourcing in the electronic equipment industry or obesity and health in the eating and drinking places industry. Consistent with the framework in my research, several investors have started to engage at the industry level, endorsing or even assisting with these pre-competitive collaborations.” For example, the Swedish AP funds, in collaboration with other investors in 2016, engaged ten companies regarding the management of fish and shellfish throughout supply chains and several companies that purchase cobalt mines in the Congo. Just a few weeks ago, the world’s largest fund, the Norwegian pension fund, partnered with UNICEF, to set up a network with some of the top fashion companies to improve children’s rights in the supply chain. The initiative will also focus on areas such as children education, and health and nutrition, from access to school to working mothers’ ability to breastfeed. I identify two characteristics for investors that are likely to engage with companies at the industry-level on issues of environmental and social importance: a long time horizon for investments and significant common ownership of companies within the same industry or supply chain. The longer the time horizon, the more appealing many aspects of ESG, as mentioned above. And the more companies within an industry the investor owns, the more concerned they are with the industry as a whole, and the less favorably they view the conduct of free riders. Three types of investors satisfy both criteria. First, large index asset managers, such as Blackrock, State Street, and Vanguard. These investors hold significant shares of equity and if a company remains in a given index they will keep holding the stock. Second, active institutional investors that are large enough to effectively becoming quasi-indexers (broadly diversified low-turnover portfolios) as they seek to limit index tracking error, such as Fidelity, JP Morgan, BNY Mellon, and Northern Trust. Third, large pension funds such as GPIF, Norges Bank Investment Management, AP, and New York Common Retirement Fund. These investors also tend to hold significant portions of the equity shares of many companies while at the same time matching assets to long-term liabilities. Large index and quasi-index investors have now built teams that engage with companies in their portfolios while large asset owners have been among the leaders in engaging with companies on environmental and social issues. This does not mean that other investors do not have a role to play. In fact, I suggest that two other types of investors will play a significant role: socially responsible investment funds and individual investors. Socially responsible investment funds and investor organizations, such as CERES, have been effective at bringing environmental and social issues to the public domain putting pressure both on companies and larger investors to act. Moreover, the more individual investors care about the environmental and social attributes of their investments the less likely it is that asset managers will free-ride on other asset managers’ efforts. Consistent with this proposition, as individual investor interest in the ESG characteristics of their investments has grown, we have witnessed an increase in the number of asset managers that engage with companies. The investment management industry has been highly commoditized. Technology has put pressure on management fees, and this will only continue. Moreover, industry consolidation and scale have led to most funds quasi-indexing, if not explicitly indexing. According to my estimates for every dollar actively managed, either through high turnover diversified portfolios or through low turnover concentrated portfolios, there are three dollars in indexing or quasi-indexing. In such a market there will be tremendous rewards for market participants that can provide a differentiated service. Engaging with companies to promote positive environmental and social outcomes and being able to document the impact of those engagements may well prove to be one of those differentiators.

20 сентября 2017, 13:00

Japan Is Counting on Shareholder Activism to Improve Its Economy

Shareholder activism is a quintessentially American form of investing. In the U.S., CEOs live in fear of activist hedge funds, and politicians worry about their effects on workers. But the case for shareholder activism is perhaps best seen in Japan, where the corporate sector tends to be structurally skewed in favor of employees, at the expense of shareholders and the economy. In Japan several factors combine to help insulate managers from outside influence, including cross-holdings where the company owns shares in a partner firm, docile boards mostly composed of company executives, and a court system historically biased against investment funds. In Japan the worry lately has not been about too much shareholder activism but about too little. Remarkably, Prime Minister Shinzo Abe has embraced shareholder activism, in a bid to encourage the adoption of his corporate governance reforms, a central part of his economic policy platform. The governance shortcomings of the Japanese corporate sector are core to the sclerosis experienced by the economy since the 1980s. The Abe administration’s corporate governance reforms attempt to remedy this lack of dynamism in various ways. While it has explicitly encouraged both more shareholder-friendly governance by companies and greater engagement from institutional investors, it has implicitly supported shareholder activism as a forcing mechanism. Reform is the carrot; activist investors are the stick. Recognizing that getting Japanese institutional investors to pressure companies to implement changes that run counter to decades of cozy understanding will be, at best, a slow process. The Abe administration has created the conditions for smaller, nimbler funds — typically independent of large Japanese institutions — to push forward its corporate agenda, one company at a time. Uncharacteristically, the administration seems unconcerned by the fact that many of these funds are foreign. In fact, the government-run GPIF, Japan’s largest pension fund, has invested in Taiyo Pacific, an American activist fund targeting Japanese companies. Abe has even met with one of the most prominent American activists, Dan Loeb, in a private albeit well-publicized encounter, suggesting he sees value in foreign involvement in Japanese markets. The more positive public perception of activists in Japan marks a dramatic change. In the 2000s a wave of activists targeted Japanese-listed companies, typically adopting confrontational approaches similar to those prevalent in the United States. By and large, they failed. Whether they were Western funds, such as Steel Partners and TCI, or Japanese funds, such as Murakami, they found that the entire system conspired to support the embattled companies, no matter how impaired their corporate governance. At the time, activists were seen as bullies and pariahs. Today they’re seen as part of the solution, in part because they’ve changed tactics. Since the global financial crisis, a new wave of “constructive,” or friendly, activists (typically referred to as engagement funds) has tackled the same corporate governance issues, but with an explicitly low-key, humbler approach. Rather than berating management publicly, these funds have led quiet discussions behind closed doors. They earn senior managers’ trust by demonstrating their patience and, more often than not, refraining from asking for board seats or challenging them in proxy fights. They seek to win management over by sharing well-researched analysis and connecting them to a network of potential partners. Pioneer funds of this approach include Asuka Value-up, Taiyo Pacific, and Simplex Asset Management. (Full disclosure, I am involved in this strategy as part of Cornwall Capital). Even traditionally confrontational activists such as Third Point have shifted their strategy in Japan to adopt a more constructive approach. Since the launch of Abe’s Corporate Governance and Stewardship Codes, the number of constructive activists in Japan has proliferated. Whereas activists in Japan have historically been treated with scorn for attempting to extract value from the system, they can now point to the fact that their actions are consistent with the government’s policy goals. The jury is still out on Abe’s corporate governance reforms. Naysayers point to low adoption rates of the Stewardship Code among corporate pension plans, limited participation by listed companies that follow the Corporate Governance Code in form rather than in spirit, and continued resistance to outside influence by large numbers of listed companies. The greatest sticking point remains cross-holdings, which provide the ultimate buffer against outside influence since they effectively prevent the possibility of a takeover. Optimists point out measurable progress, including the percentage of companies listed on the Tokyo Stock Exchange level 1 with at least two independent board directors, which has increased from 17% in 2012 to 88% in 2016. Will Japanese-style shareholder activism help the corporate governance reforms succeed? Anecdotal evidence points to individual successes: for instance, Third Point preempting a nepotistic succession plan at Seven & I and Misaki Capital guiding interior materials distributor Sangetsu to improved investor relations and capital efficiency. But much of the engagement activity takes place discreetly, by design. And some corporate actions are likely taken by management to preempt engagement funds from intervening. Listed companies have returned record levels of cash to shareholders through dividends and share buybacks (a capital allocation shift that is less vulnerable to criticisms of short-termism than in the U.S., given that Japanese companies are global outliers in terms of excess cash, low ROEs, and limited domestic growth prospects). More important, companies are increasingly tuned into the Corporate Governance Code. In my own experience, many companies have gone from being completely oblivious to being solicitous of investors’ perspective on the code. A subset of companies has become less suspicious of engagement funds. Optimists perceive the emergence of a snowball effect. Other countries with dormant, overprotected corporate sectors should take heed of Japan’s experiment in the use of shareholder activism as a policy tool.

14 июня 2017, 18:50

Глава РФПИ получил орден Александра Невского

Генеральный директор Российского фонда прямых инвестиций Кирилл Дмитриев награжден указом Владимира Путина орденом Александра Невского за большой вклад в реализацию международных инвестиционных проектов и социально-экономическое развитие РФ.

14 июня 2017, 18:50

Глава РФПИ получил орден Александра Невского

Генеральный директор Российского фонда прямых инвестиций Кирилл Дмитриев награжден указом Владимира Путина орденом Александра Невского за большой вклад в реализацию международных инвестиционных проектов и социально-экономическое развитие РФ.

03 июня 2017, 10:09

Gov't pension fund sues Toshiba auditor over investment losses

Japan's giant Government Investment Pension Fund (GPIF) has sued the local affiliate of global accounting firm Ernst & Young, claiming $31 million for losses on investments in Toshiba…

11 апреля 2017, 07:47

Japan's GPIF starts recruiting managers for alternative assets

TOKYO (Reuters) - Japan's Government Pension Investment Fund (GPIF) on Tuesday began recruiting asset managers for investments in private equity, infrastructure and real estate, as the world's...

03 марта 2017, 11:52

Крупнейший в мире пенсионный фонд заработал $92 млрд

Крупнейший в мире пенсионный фонд зафиксировал максимальный за всю историю квартальный рост прибыли, поскольку японские акции выросли, а падение иены сделало более выгодными иностранные инвестиции, сообщает Bloomberg.

03 марта 2017, 11:52

Крупнейший в мире пенсионный фонд заработал $92 млрд

Крупнейший в мире пенсионный фонд зафиксировал максимальный за всю историю квартальный рост прибыли, поскольку японские акции выросли, а падение иены сделало более выгодными иностранные инвестиции, сообщает Bloomberg.

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03 марта 2017, 11:28

Кое-кто заработал в прошлом квартале $92 миллиарда

Крупнейшая управляющая компания мира в области пенсионных сбережений - Государственный пенсионный фонд Японии (GPIF) - в третьем квартале 2017 финансового года получила прибыль от инвестиций в размере 8%, или 10.5 триллиона японских иен, что эквивалентно $91.9 миллиарда, согласно данным GPIF. Результат стал рекордным за всю историю фонда, что док… читать далее…

02 февраля 2017, 15:22

Япония инвестирует пенсии в инфраструктуру США

Государственный пенсионный инвестиционный фонд Японии (GPIF), который является крупнейшим в мире пенсионным фондом, увеличив вложения в рисковые активы, перешел к инвестициям в инфраструктурные проекты в США.

02 февраля 2017, 15:22

Япония инвестирует пенсии в инфраструктуру США

Государственный пенсионный инвестиционный фонд Японии (GPIF), который является крупнейшим в мире пенсионным фондом, увеличив вложения в рисковые активы, перешел к инвестициям в инфраструктурные проекты в США.

19 декабря 2016, 18:31

TrimTabs Issues Warning After A Record $98 Billion Flood Equity ETF Since The Election

Having recently (before the election) found that stock buybacks have tumbled to the lowest level in 5 years, coupled with the lowest amount of insider buying since 2011, this morning TrimTabs Investment Research reported what regular readers already know, namely that U.S. equity exchange-traded funds received a record $97.6 billion from Tuesday, November 8 through Thursday, December 15, promptly TrimTabs to ask if "investors are all-in on US stocks?" “The stampede into U.S. equity ETFs since the election has been nothing short of breathtaking,” said David Santschi, chief executive officer at TrimTabs.  “The inflow since Election Day is equal to one and a half times the inflow of $61.5 billion in all of last year.  One has to wonder who’s left to buy.” Well, there is also the BOJ, SNB, the GPIF and a variety of other official and unofficial institutions who can print money at will to adjust their cost basis... In a research note, TrimTabs points out that the inflow into U.S. equity ETFs since Election Day is equal to 6.3% of these funds’ assets.  December’s inflow has already reached $43.4 billion, putting this month’s inflow on track to surpass the record monthly inflow of $50.7 billion set in November. TrimTabs also noted that buying has been persistently heavy since the election.  U.S. equity ETFs have had outflows on only three trading days, and inflows swelled to $27.8 billion on the five days ended Thursday, December 15, the highest weekly inflow in four weeks. This, however, is far from a bullish sign according to TrimTabs, which issued the following warning as a result of the "breathtaking" inflows: “ETF flows tend to be a good contrary indicator when they become extreme, so the buying frenzy doesn’t bode well for U.S. equities,” said Santschi.  “The market also could get a nasty jolt in January, when investors who’ve been postponing stock sales this year in anticipation of lower tax rates next year start to sell.” Bullish or not, one thing is certain: active investors, who are one of the primary "sources of funds" as this massive capital reallication has taken place, would be happy with even a fraction of this number going to them; alas so far the 2 and 20 model continues to be broken, as increasingly more investors

26 ноября 2016, 09:24

Крупнейший в мире пенсионный фонд заработал $21 млрд

Государственный пенсионный инвестиционный фонд Японии (GPIF) в июле-сентябре заработал на вложениях 1,8%, или 2,4 трлн иен ($21 млрд), увеличив активы до 132,1 трлн иен. Инвестиции в японские и зарубежные акции принесли фонду 3,1 трлн иен, поскольку цены на эти бумаги восстановились после падения, вызванного решением Великобритании выйти из ЕС. Это компенсировало убытки по облигациям в размере 706,9 млрд иен.

25 ноября 2016, 12:02

Крупнейший в мире пенсионный фонд заработал $21 млрд

Крупнейший в мире пенсионный фонд получил прибыль впервые за четыре квартала благодаря росту цен на акции, сообщает Bloomberg.

25 ноября 2016, 12:02

Крупнейший в мире пенсионный фонд заработал $21 млрд

Крупнейший в мире пенсионный фонд получил прибыль впервые за четыре квартала благодаря росту цен на акции, сообщает Bloomberg.

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29 августа 2016, 18:39

Государственный пенсионный фонд Японии отчитался о квартальном убытке

Государственный пенсионный фонд Японии (GPIF), крупнейшая управляющая компания мира в области пенсионных сбережений, отчитался о квартальном убытке. Так,убыток от инвестицийво втором квартале составил5,2 трлн иен ($52 млрд). При этомобъем активов под управлением GPIF сократился до 129,7 трлн иен.

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29 августа 2016, 14:48

Япония: Печатный станок стал крупнейшим акционером у 474 компаний (alexsword)

Финансовая система Японии, которая показывает будущее западной системы в целом, сейчас полна забавных парадоксов, находящихся в совершенно диком противоречии с мифологией о "рыночной экономике". В частности, Nikkei сообщает, что после всех этих масштабных вливаний печатным станком ЦБ и GPIF (пенсионный фонд) Японии стали крупнейшими акционерами у 474 из 1,970 компаний, торгуемых на бирже Токио (речь идет только о компаниях первой секции, т.е. наиболее крупных). Впрочем, это лишь жалкое начало, так как в конце июля ЦБ Японии анонсировал ускорение монетизации различной макулатуры печатным станком (в первую очередь, речь о выкупе equity ETFs). Кстати, несмотря на то, что биржевой индекс Nikkey вырос на этом йеновом героине на 70% за последние годы, он все равно на 57% ниже своих пиков в конце 80-х.  Думаю, что на те высоты им без полноценной гиперинфляции не вернуться :-). И остается лишь гадать на какую глубину унитаза опустились бы биржевые индексы, если бы не эта клоунада. 24 комментария

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28 августа 2016, 08:35

Крупнейший в мире пенсионный фонд потерял $52 млрд

Японский пенсионный фонд GPIF, который считается крупнейшим в мире, потерял 3,9% от его суммарных активов. 5,2 трлн иен или примерно 52 млрд долларов японские пенсионеры потеряли во втором квартале, сообщает Bloomberg. Крупные убытки объясняются обвалом акций японских предприятий, в которые вложена часть денег фонда. Не в пользу пенсионеров оказалось и резкое укрепление иены.

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27 августа 2016, 16:22

Крупнейший пенсионный фонд потерял $52 млрд.

Интересная информация для трейдеров, японский государственный пенсионный фонд (GPIF), который является одним из крупнейших в мире, задекларировал во втором квартале убытки в размере 52 млрд. долларов.По данным второй квартал фонд завершил с убытком в 3.9% от его суммарных активов. По мнению президента фонда Норихиро Такахаси такие результаты возникли по двум причинам изза референдума в Великобритании и вышедшие данные по безработице в США в мае, которые были ниже прогнозируемых. При этом сам Норихиро уверен что данная ситуация для фонда не критическая и прокомментировал следующим образом:«Даже если рыночные цены колеблются в краткосрочной перспективе, это не повредит получателям пенсионных выплат. Мы инвестируем, опираясь на долгосрочную перспективу».

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27 августа 2016, 13:51

Крупнейший японский пенсионный фонд потерял во II квартале 52 млрд. долл. (SM-brain)

  Японский пенсионный фонд GPIF, который считается крупнейшим в мире, потерял 3,9% от его суммарных активов. 5,2 трлн иен или примерно 52 млрд долларов японские пенсионеры потеряли во втором квартале, сообщает Bloomberg. 14 комментариев