Displaying items by tag: esg

Friday, 01 March 2024 03:11

The Clients That Need Direct Indexing

Direct indexing offers solutions for complex financial challenges but isn't suitable for every investor. Identifying which clients may benefit involves considering factors like tax-loss harvesting, ESG preferences, factor investing, and managing large positions or capital gains. 


High-net-worth clients with significant capital gains and taxable equity holdings stand to gain the most from daily tax-loss harvesting, potentially doubling their harvested losses. For clients passionate about ESG criteria, direct indexing allows for precise customization, albeit with a slight fee premium and potential tracking error. Factor investing via direct indexing suits clients with specific customization needs beyond prepackaged ETFs, although advisors must weigh the added complexity against potential benefits. 


Transitioning large existing positions into diversified portfolios using direct indexing offers tax efficiency, particularly for clients with concentrated holdings or restrictions on selling.

Finsum: Advisors need to gauge their clients benefits from direct indexing strategies, and the costs and concerns aren’t always a net positive. 


Published in Bonds: Total Market
Friday, 23 February 2024 03:48

Active Bond Funds and ESG Unite at BNP

BNP Paribas Asset Management has introduced a new ESG active fixed income ETF range, starting with the BNP Paribas Easy Sustainable EUR Corporate Bond and BNP Paribas Easy Sustainable EUR Government Bond ETFs. These ETFs aim to replicate benchmark performance while integrating sustainable principles using BNPP AM's ESG methodology and exclusion policies. 


The firm's Head of Index & ETF Strategies highlighted the agility of this approach in responding to controversies and adapting to changing environmental factors, aligning with sustainability label criteria. BNP made a commitment in January to improving its offerings around ESG offerings and this new suite of investments will fall in line with those goals.


 Lorraine Sereyjol-Garros, Global Head of Development for ETFs & Index Funds at BNPP AM, emphasized the importance of active ESG fixed income management in navigating the challenging market landscape, offering diversification and sustainable credentials in an affordable and convenient ETF structure.

Finsum: Active bond funds could be critical to navigating the landscape of 2024 as macro volatility is looming. 

Published in Bonds: Total Market
Tuesday, 14 November 2023 13:41

Optimizing Portfolios with Direct Indexing

For many clients who want personalized solutions and have complicated financial needs, the traditional approach of mutual funds or ETFs fall short. For investors with more complex tax issues or who desire that their investments align with their values, direct indexing offers a more comprehensive strategy.


Direct indexing captures many of the benefits of passive investing such as diversification, low-costs, and investing in an index. But the key differences are that the actual components of an index are owned by the investor rather than the fund. 


Thus, there is a greater level of customization as investors modify these holdings to reflect their own political, religious, or ethical beliefs. This is especially pertinent with the increasing traction of ESG or values-based investing. 


This customization can lead to better risk management as portfolios can be adjusted to reflect a clients’ particular risk profile and long-term goals. Another benefit is increased tax efficiency as there is more control over when capital gains are realized. Tax losses can be regularly harvested and used to offset capital gains. Similarly, charitable giving through direct indexing can also have certain tax advantages while also giving clients an opportunity to support causes or organizations that they believe in. 


Finsum: Direct indexing has specific benefits that may appeal to clients looking to optimize their tax situation, align their investment with their values, while still retaining the benefits of passive investing. 


Published in Wealth Management
Sunday, 02 July 2023 18:46

Assessing the Impact of ESG Investing

In an article for Quartz, Nate DiCamillo assesses whether ESG funds are having a positive impact. In theory, ESG investing will compel companies to act more responsibly by accounting for environmental, social, and governmental principles when making decisions.

Critics contend that ESG funds are merely a means for asset managers to collect fees given the murky nature of ESG factor scoring. It also creates an incentive for companies to ‘greenwash’ certain behaviors simply to get higher ESG scores. 

Others are also dismissive of ESG, because it attempts to combine disparate issues into a single product that have little relation to each other. Additionally, there is little evidence that ESG results in better outcomes, yet companies spend more resources to align with these principles to please ESG-focused investors. 

What’s interesting is that the trend may have peaked. In the first quarter of the year, inflows into ESG funds were down by $163 billion compared to last year. In part, it’s due to the partisan backlash against the trend as many conservatives are pushing legislation to ensure that state funds are barred from investing in ESG funds or using ESG to make investment decisions. 

Finsum: ESG investing has become the center of intense controversy. Yet, it remains unclear whether it’s actually effective in terms of reaching its goals. 


Published in Wealth Management
Thursday, 29 June 2023 07:14

Blackrock’s Fink Eschewing ESG Label

At the Aspen Ideas Festival, Blackrock CEO Larry Fink surprised many when he said that he will no longer use the term ‘ESG’ because it had been misappropriated by the far left and the far right. Of course, Blackrock and Fink have been one of the leading proponents of the movement and used their station as one of the world’s largest asset managers to push corporations to consider these factors when making decisions. 

Now, many conservatives are pushing back and want to end the consideration of ESG factors when making investment decisions. At the state level, legislation has already been passed in many red states to ban ESG investing by state funds. Florida actually pulled $2 billion out of Blackrock funds to protest its ESG stance. 

Fink’s verbal retreat is an acknowledgement of these forces, but it’s uncertain whether this is simply a rhetorical change or a change in behavior. Previously, Fink has spoken passionately about the risks that climate change poses to companies and the importance of governance and diversity at the highest levels. He believes that long-term financial results are enhanced by considering these factors in decision-making by executives. 

Finsum: Blackrock CEO Larry Fink is one of the original and most passionate believers in ESG investing. However due to recent political blowback, he has said that he will stop using the term.


Published in Wealth Management
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