Eighty-four percent of pension funds regard stewardship practices as pivotal to improving the quality of beta – investment returns generated by taking broad, passive exposure to a market index – while generating positive environmental, social and governance spin-offs, according to a new DWS-sponsored research report.
Of 127 pension funds surveyed globally by CREATE-Research on behalf of DWS, 56% stated that a manager’s capacity and track record in fulfilling the stewardship goals of its clients is taken into account to a ‘large extent’, with 27% taking account of stewardship to a ‘medium extent’, and only 10% taking account of it to a ‘small extent’ and 7% not at all.
Stewardship involves stockholders taking a long-term strategic interest in guiding the companies they are invested in via active engagement at a number of levels, including, for example, voting at shareholder meetings.
The report also found that:
- The fastest growing part of the passive investment market, from the pension fund perspective, will be solutions with strong tilts towards ESG (environmental, social and governance).
- 60% of pension funds surveyed regard stewardship as ‘very important’, while 80% expect stewardship demands on their passive asset managers to increase.
- Passive funds are advancing into the core part of pension fund portfolios, leaving specialist or illiquid strategies to generate alpha.
- Sixty-six percent of survey respondents stated that passive investments are part of their ‘already mature’ portfolios.
- Pension fund use of ETFs is increasing, with 26% of respondents citing ETFs as their preferred passive investment tool, up from 23% last year.
“As one of the world’s most established providers of passive investments, and one which has put in place active stewardship on passive funds, we welcome this confirmation that pension funds view stewardship as a key differentiator while also increasingly treating passive solutions as mainstream in their portfolios,” said Simon Klein, DWS’s Head of Passive Sales for Europe and Asia.
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DWS Group (DWS) is one of the world's leading asset managers with EUR 704bn of assets under management (as of 31 March 2019). Building on more than 60 years of experience and a reputation for excellence in Germany and across Europe, DWS has come to be recognized by clients globally as a trusted source for integrated investment solutions, stability and innovation across a full spectrum of investment disciplines.
We offer individuals and institutions access to our strong investment capabilities across all major asset classes and solutions aligned to growth trends. Our diverse expertise in Active, Passive and Alternatives asset management – as well as our deep environmental, social and governance focus – complement each other when creating targeted solutions for our clients. Our expertise and on-the-ground-knowledge of our economists, research analysts and investment professionals are brought together in one consistent global CIO View, which guides our strategic investment approach.
DWS wants to innovate and shape the future of investing: with approximately 3,600 employees in offices all over the world, we are local while being one global team.
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