Our annual survey of the market conducts in-depth research to better understand how the coming together of two trends—smart beta and sustainable investment—are perceived, considered and used by asset owners around the world. 

We are finding that over the last couple of years a growing number of institutional investors have taken the opportunity to integrate certain sustainability parameters—usually climate-related, but sometimes other ESG measures, too—when they have awarded new smart beta mandates. This has become a majority, the new normal, for new asset owner smart beta mandates. 

Five key findings:

By Philip Lawlor, head of Global Investment Research

The recent rebound in inflation breakevens (a gauge of market inflation expectations based on inflation-linked bond yields) and the sharp drop in real yields have sparked worries about stagflation amid persistently low economic growth and supply-chain disruptions and shortages.

FTSE US long-dated breakeven inflation and real yields (%)

Source: FTSE Russell / Refinitiv. Data through August 17, 2020. Past performance is no guarantee to future results. Please see the end for important disclosures.

Focusing on the acceleration of US money supply growth alone…

Inflation concerns in the US have been stoked in part by the huge expansion in M2 money supply growth (chart below, bottom), propelled by renewed Federal Reserve asset purchases and a pandemic-fueled surge in bank deposits. Signs of Fed willingness to let inflation overshoot its longstanding 2% target may also be feeding these...

Our annual survey of the market conducts in-depth research to better understand how the coming together of two trends—smart beta and sustainable investment—are perceived, considered and used by asset owners around the world. 

We are finding that over the last couple of years a growing number of institutional investors have taken the opportunity to integrate certain sustainability parameters—usually climate-related, but sometimes other ESG measures, too—when they have awarded new smart beta mandates. This has become a majority, the new normal, for new asset owner smart beta mandates. 

Five key findings:

By Tony Campos, director of ESG Americas

In the midst of the COVID-19 pandemic and increased focus on social justice, sustainable investment funds have attracted record inflows this year, pushing global assets under management over $1 trillion, according to the Financial Times. This trend includes a sub-strategy of what we’ve classified as "smart sustainability," or rather, the integration of ESG considerations into a smart beta index strategy. 

To examine the uptick in sustainable investments and better understand the growing interest in smart sustainability, we surveyed 139 global asset owners earlier this year to gauge their evaluation and adoption of these strategies. The results are a striking reminder that sustainable investment has become an established consideration for institutional investors globally with 72% implementing or evaluating ESG (rising 14% from last year). Yet interestingly, the survey reveals that while regional differences...

By Philip Lawlor, head of Global Investment Research

The record-breaking surge in the price of gold has been the standout market theme of the past month. As shown below, gold has rocketed past its 200-day moving average to nearly $2,000 a troy ounce, piercing the previous all-time high of September 2011—and outstripping even this year’s gains in high-flying US technology stocks. The sources of the precious metal’s newfound strength can be mined for useful insights.

Gold price and 200-day moving average

Source: FTSE Russell / Refinitiv. Data as of July 31, 2020. Past performance is no guarantee to future results. Please see the end for important disclosures.

The main reason for gold’s surge is this year’s precipitous drop in US Treasury yields below the expected pace of inflation. As shown below, there has been a strong inverse relationship between gold and the US real yield. When real yields are negative, the opportunity cost of holding...

Our annual survey of the market conducts in-depth research to better understand how the coming together of two trends—smart beta and sustainable investment—are perceived, considered and used by asset owners around the world. 

We are finding that over the last couple of years a growing number of institutional investors have taken the opportunity to integrate certain sustainability parameters—usually climate-related, but sometimes other ESG measures, too—when they have awarded new smart beta mandates. This has become a majority, the new normal, for new asset owner smart beta mandates. 

Five key findings:

By Francis Kim, product manager, Industry Classification Benchmark 

US leisure stocks have experienced the best of times and the worst of times since COVID-19 swept around the world. The pandemic has reshaped consumer behavior globally as populations have on one hand sought to slow the spread of the virus by engaging in more outdoor, solitary  activities, while on the other, they have avoided or been unable to take part in leisure pursuits which involve crowds.

This split is already reflected in the performance of US equities. Stocks in our Russell 3000 index classified as recreational vehicle and boat equities by our enhanced ICB classification framework soared from March to June 2020, Conversely, recreational services companies—such as sports and concert venues—have suffered, ending the month of June as the worst performing Russell 3000 ICB subsector.

By definition, the Russell 3000 “Recreational Vehicles and Boats” subsector is comprised of...

The global response to climate change represents the “most significant economic transition in history,” according to David Blood, the co-founder of Generation Investment Management, and an investment opportunity unlike any he has seen in his 35-year career in finance.

“The economic opportunities of this transition, from a poverty and inequality perspective as well as a climate change perspective, are extraordinary,” he said, speaking on the second of a series of webinars organised by London Stock Exchange Group (LSEG) and the Principles for Responsible Investment (PRI).

Generation Investment Management, founded in 2004 by Blood with Vice President Al Gore, manages nearly $20bn in assets invested in companies its fund managers judge to be sustainable. “We want all CEOs to engage on climate, we want them to demonstrate action around the Paris accord or net-zero, and we want them to be clear about their goals,” he said.

“If they see the risks, but critically...

Investec has launched the UK’s first retail ESG-linked Deposit Plan. The product is part of Investec’s 100th launch, marking 12 years in which Investec has offered consistently available Deposit Plans and Investment Plans, with 1,175 matured products and no capital loss.

The FTSE4Good 6 Year Deposit Plan 1, the first of its kind, is a 6-year fixed term Deposit Plan tied to the FTSE4Good UK 50, an index made up of the largest 50 companies in the FTSE which meet defined ESG criteria.

The product returns 18% (equivalent to 3% per annum) if the FTSE4Good UK 50 is higher at maturity than at its starting level. If the FTSE4Good UK 50 is lower than or equal to the starting value at maturity, the investor only gets back his or her initial deposit. The Plan offers a sustainable alternative to Investec’s long-standing FTSE 100 6 Year Deposit Plan.

By Philip Lawlor, head of Global Investment Research

Following a long rally, the US dollar slid 5% against a basket of other major currencies in July, marking its worst monthly decline in more than a decade. The causes and ripple effects of this drop have important implications for future market performance.

As the chart below illustrates, the dollar’s July pullback has almost solely been about the strength of other developed-market currencies, particularly those of northern Europe, the euro and the pound sterling.

FX moves vs US dollar – Month ended July 31, 2020

Source: FTSE Russell / Refinitiv. Data as of July 31, 2020. Past performance is no guarantee to future results. Please see the end for important disclosures.

The culprit – negative US real yields

The US dollar's weakness can be linked to the dramatic drop in US real (i.e., inflation-adjusted) yields. As shown below, yields on the FTSE US 3-5yr inflation-linked bonds...

Real estate investing has historically lacked the appropriate tools to allow investors to assess their exposure to climate risk and to integrate it effectively in their investment strategies. To help address this gap, the FTSE EPRA Nareit Green Indexes have been designed to allow investors to identify real estate companies with strong sustainability performance.

These indexes are a sustainability-focused extension to the FTSE EPRA Nareit Global Real Estate Index Series, with approximately US$341billion of assets tracking this leading series of listed real estate benchmarks1.

Additionally, these indexes:

Benchmarks are pervasive in our industry as the yard stick against which performance is measured. But do benchmarks encourage a forward looking approach to investments, are they consistent with long term investing, and will they help or hinder our efforts to meet important national and global goals such as the Paris Agreement and Sustainable Development Goals? This session aims to unpack a variety of views on benchmarks, how we use them, how they are developing and new ways of approaching appropriate benchmarks that are consistent with a responsible investment approach.

EVENT DETAILS

DATE: August 6

TIME: 4pm AEST

PLATFORM: Zoom webinar

REGISTER: HERE

Conference attendees are automatically registered.

By Tim Batho, (chief strategist, index policy, Asia Pacific)

Our recent announcements regarding the conclusion of the first phase of China A Shares, and of the final tranche of Saudi Arabian stocks into our FTSE Global Equity Index Series (GEIS) matters because asset owners and managers allocate according to the classification, and investment flows into promoted countries are also impacted.

In a recent blog we explained how we differentiated between developed and emerging markets in our country classification processes. But we also differentiate, within our Equity Country Classification framework, between Secondary Emerging and Advanced Emerging status. Why we do divide the emerging market classification in this way?

Historic perspective

The genesis of this two-band emerging market structure dates back almost 20 years, when the country and capitalization coverage of the FTSE global equity indexes were expanded with the incorporation of the Barings...

The global response to climate change represents the “most significant economic transition in history,” according to David Blood, the co-founder of Generation Investment Management, and an investment opportunity unlike any he has seen in his 35-year career in finance.

“The economic opportunities of this transition, from a poverty and inequality perspective as well as a climate change perspective, are extraordinary,” he said, speaking on the second of a series of webinars organised by London Stock Exchange Group (LSEG) and the Principles for Responsible Investment (PRI).

Generation Investment Management, founded in 2004 by Blood with Vice President Al Gore, manages nearly $20bn in assets invested in companies its fund managers judge to be sustainable. “We want all CEOs to engage on climate, we want them to demonstrate action around the Paris accord or net-zero, and we want them to be clear about their goals,” he said.

“If they see the risks, but critically...

Face Of Benefits Changed

In the “new normal” the face of benefits is looking a little different, says Kelly Sparkes, senior group benefits consultant at Eckler. In April, when businesses were shut down due to the COVID-19 pandemic, health and dental claims declined significantly, she said at its ‘The new normal: Considerations for benefit plan sponsors.’ The numbers showed dental claims dropped between 80 and 90 per cent and healthcare between 25 and 30 per cent. This prompted most insurance companies to make a three-month commitment to reduce premiums. She said this was great because it removed the financial uncertainty, which was meaningful for most of plan sponsors. As well, the drop in claims volumes also meant lower costs for self-insured plans. In June, as lockdowns were eased, claims started rising across the board to pre-COVID levels, possibly due to pent up demand. Virtual care is a relatively new benefit, which has come to the forefront in this “new...

2020 has been an unusual and, at times, harrowing year for investors globally. With the onset of unprecedented market volatility as the COVID-19 Global Pandemic began to impact markets in March, and continued investor uncertainty as previously rosy economic reopening scenarios take unanticipated twists and turns, investors are looking for sources of market information that are objective, transparent and reliable. Global index providers, by performing their essential functions, have addressed this investor need in a time of crisis.

Let’s start with objectivity. With markets unprecedented short-term spikes in volatility, investors have been hungry for objective market data and information to help inform necessary investment decisions and navigate periods of market disruption and even dislocation. Investors have looked to independent index providers for unbiased content and data, and many providers have created online COVID-19 hubs for investors on their websites...

Editor’s Note: This June, the Index Industry Association is introducing a new content stream that highlights the form and function of indexes, and their role in 2020’s investing environment. This blog is a companion piece to our new five-part video series, Index Foundations, which is now live on our Insights page.

Earlier this year, the index world took center stage. As a result of the spread of the COVID-19 virus and its disruptive impact on the world economy, global stock market indexes recorded some of their biggest advances and declines in history. 2020 has seen significant market volatility and even large intraday swings hanging on geopolitical events, the latest bankruptcy filing or growing hope for a potential vaccine. Market indexes have kept score of all of these significant market ups and downs triggered by the Global Pandemic. The question now: will indexes be as important going forward for investors?

And in fact, yes, this is an immense...

Real estate investing has historically lacked the appropriate tools to allow investors to assess their exposure to climate risk and to integrate it effectively in their investment strategies. To help address this gap, the FTSE EPRA Nareit Green Indexes have been designed to allow investors to identify real estate companies with strong sustainability performance.

These indexes are a sustainability-focused extension to the FTSE EPRA Nareit Global Real Estate Index Series, with approximately US$341billion of assets tracking this leading series of listed real estate benchmarks1.

Additionally, these indexes:

Unless otherwise stated, all figures below refer to continuing operations for the six months ended 30 June 2020 (H1 or H1 2020).  Comparative figures are for continuing operations for the six months ended 30 June 2019 (H1 2019). 

Good financial and operational performance in H1 drives 11% increase in AEPS