Displaying items by tag: active management

ESG investing is all the rage, but it has its limitations. Passive funds prevent real change by creating a stagnant environment that doesn’t encourage change, just look at how much C02 has increased despite all of the ESG inflows, or greenwashing where companies appear to be more environmentally servicing than they necessarily are. Active ESG investing (AESG) could be a game changer because it can rely on qualitative analysis and trends of a company to select them in an ESG fund rather than a gameable statistic. Additionally, active funds can have a bigger impact on diversity in board selection because it can have real corporate accountability rather than once again hitting a target statistic. Active funds can also put together better incentive structures to bring more companies into the ESG fold.

FINSUM: AESG funds is the logical evolution of standard ESG by merging two booming subsectors, and this is the time for active fund outperformance given ultralow yields.

Companies within the Disruptive Innovation space have generated higher levels of idiosyncratic risk relative to broad markets and major asset classes, creating stronger alpha opportunity for skilled active managers…see the full story on our partner’s site

A new study for BlackRock shows exactly how active funds have an edge moving forward in the transition to net-zero emissions. Active investors’ advantage over traditional investors comes by incorporating sustainable insights, identifying climate-related financial catalysts, and seeking investment in emerging tech. Rich Kushel, Senior Managing Director at BlackRock says their strategies can identify companies and data points that generate a higher alpha. BlackRock is putting their money where their mouth is by launching an array of new active ESG funds across bond and equity markets targeting value or growth in different capitalization categories. In total, there will be nine new funds with ESG objectives.

FINSUM: The traditional rules of investment haven’t applied to ESG and technology, so a new set of analytical insights and active management may outperform traditional analysis.

Active funds are finding themselves in a better position than ever. Outflows are at their lowest levels in over half a decade, inflows are starting to swell, so what is the key to their success? The predominant factor driving them is the wide range of dispersion in the stock market’s performance. Sure, the aggregate performance has been great post-pandemic but the difference between the bottom and top quintiles has been above average for the last year. This gives pickers an advantage over passive funds. They are making their picks by not overreacting to inflation news and doubling down on stocks that benefit from stay-at-home orders and the covid environment. Active funds tend to downplay value-oriented stocks, and the few they are bullish on are bargains in communications companies. Finally, Facebook is the through-line, as nearly two-thirds of active funds hold the largest social network.

FINSUM: This is definitely a ‘pickem’ environment with large dispersion in the S&P 500, and broad index/passive funds will lag active managers.

(New York)

ETFs have dominated the investment world for the last decade as investors seek to minimize risk while getting particular market exposure, but…see the full story on our partner Magnifi’s site.