Passive Investing 2020

The third edition of the DWS-sponsored CREATE passive investing report turns the spotlight on global warming.

Addressing climate change in investment portfolios

The third edition of the DWS-sponsored CREATE passive investing report turns the spotlight on global warming. It surveys 131 pension plans in 20 jurisdictions with a combined AuM of €2.25 trillion asking two questions: how are pension plans developing their broad passive holdings? And why, how and to what extent are asset holders factoring climate change into their passive portfolios and their future investment plans?

Selected key points from the survey

Now that passives are entrenched, focus is broadening to thematic, including climate-related, investments.

  • Almost 90% of plans favour equity investing for their passive investments (70% via traditional cap-weighted index funds).
  • 27% expect smart beta allocations to grow more than 5% per annum over the next 3 years.
  • 57% expect overall ESG allocations to grow more than 5% per annum over the next 3 years.
  • While climate-linked investment is embedded in passive asset allocation (26% commit over 15% of their
    passive funds to the segment), 56% still have no allocation at all.
  • Over the next three years, 65% of plans intend to increase their climate-linked passive allocations.
  • 70% select asset managers on the basis of their ‘green’ track record for climate-related investments

Passives are anchored in the core portfolio – and thematic passives will grow

Passive investments’ 31% share of plan portfolios is marginally down on the past two years. The Covid-19 crisis hit traditional index funds in particular, while the share of ETFs, smart beta and segregated accounts have risen as portfolios have shrunk. Reliance on equities has risen, with 89% of plans now investing in them, versus 50% for fixed income. Holding periods continue to extend in the belief that ‘time in’ the market matters more than ‘timing’ the market. Passive funds now stand alongside active funds as part of a diversified portfolio that continues to
rely on buy-and-hold investing and mean reversion.

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The information on this website should not be construed as an offer or solicitation of securities or services or an endorsement thereof in any jurisdiction or in any circumstance that is otherwise unlawful or not authorized. The information contained on this website is not intended as investment, accounting, tax or legal advice, but to the extent may be deemed to be a financial promotion under non-U.S. jurisdictions, is provided for use by professional investors only and not for onward distribution to, or to be relied upon by, retail investors. Products and services may be provided in various countries by the subsidiaries and joint ventures of DWS.

Nothing contained herein is fiduciary or impartial investment advice that is individualized or directed to any plan, plan participant, or IRA owner regarding the advisability of any investment transaction, including any IRA distribution or rollover.

The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries, such as DWS Distributors, Inc., which offers investment products, or DWS Investment Management Americas, Inc. and RREEF America L.L.C., which offer advisory services.

R-070495-1 (9/20)

The DWS Americas website is published in the United States for investors or institutions who are residents of the United States. Investors or institutions outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this website.

The information on this website should not be construed as an offer or solicitation of securities or services or an endorsement thereof in any jurisdiction or in any circumstance that is otherwise unlawful or not authorized. The information contained on this website is not intended as investment, accounting, tax or legal advice, but to the extent may be deemed to be a financial promotion under non-U.S. jurisdictions, is provided for use by professional investors only and not for onward distribution to, or to be relied upon by, retail investors. Products and services may be provided in various countries by the subsidiaries and joint ventures of DWS.

Nothing contained herein is fiduciary or impartial investment advice that is individualized or directed to any plan, plan participant, or IRA owner regarding the advisability of any investment transaction, including any IRA distribution or rollover.

The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries, such as DWS Distributors, Inc., which offers investment products, or DWS Investment Management Americas, Inc. and RREEF America L.L.C., which offer advisory services.

R-070495-1 (9/20)

The DWS Americas website is published in the United States for institutional investors who are residents of the United States. Institutional investors outside of the United States are subject to securities and tax regulations within their applicable jurisdictions that are not addressed on this website.

The information on this website should not be construed as an offer or solicitation of securities or services or an endorsement thereof in any jurisdiction or in any circumstance that is otherwise unlawful or not authorized. The information contained on this website is not intended as investment, accounting, tax or legal advice, but to the extent it may be deemed to be a financial promotion under non-U.S. jurisdictions, it is provided for use by professional investors only and not for onward distribution to, or to be relied upon by, retail investors. Products and services may be provided in various countries by the subsidiaries and joint ventures of DWS.

Nothing contained herein is fiduciary or impartial investment advice that is individualized or directed to any plan, plan participant, or IRA owner regarding the advisability of any investment transaction, including any IRA distribution or rollover.

The brand DWS represents DWS Group GmbH & Co. KGaA and any of its subsidiaries, such as DWS Distributors, Inc., which offers investment products, or DWS Investment Management Americas, Inc. and RREEF America L.L.C., which offer advisory services.

R-070497-2 (3/21)