The words benchmark and index are often used as synonyms in the financial language. Generally speaking, this seems to be right, but there are some differences between an index and a benchmark that every investor needs to know, since a benchmark is not necessarily the same as an index. An index, especially for securities markets, is a key figure that expresses the development of the prices for the respective securities over time. With regard to this, it indicates the basic trend in a capital market. This means an index serves as an indicator of the state of a market or

As ETFs become increasingly successful in gathering assets from ESG-oriented investors, it is no surprise that active managers have started to claim that serious ESG strategies need active management. Since we know that similar claims from active managers over plain vanilla ETFs have been proven wrong in the past, one has to check if the new claims are true. One of the major claims of the critiques is the fact that ESG indices, which are the basis for ESG ETFs, review their constituents only a few times a year and can’t in most cases react directly to controversies or scandals.

The International Organization of Securities Commissions (IOSCO) plans to publish its first regulatory guidance for raters of corporate environmental, social, and governance (ESG) performance. It is doing this to stem growing concerns among asset managers about overstated green credentials. This announcement is in line with the IOSCO Board Priorities – Work Program 2021 – 2022, where IOSCO stated that it will contribute to the goal of improving the completeness, consistency, and comparability of sustainability reporting by delivering respective reports on sustainability-related disclosures for asset managers (including greenwashing) and issuers, ESG ratings, and ESG data providers. The IOSCO board has identified

The S&P 500 Composite Index (.SPX) will add Tesla Inc. (TSLA.O) on Dec. 21. The electric vehicle (EV) maker’s addition will be accompanied by the removal of Apartment Investment and Management Co (AIV.N), which is part of the Residential REITs sub-industry. Once added, Tesla will become one of the largest holdings in the S&P 500. We look at how these changes will affect expectations for the S&P 500. Exhibit 1: Tesla (TSLA.O) vs. S&P 500 (.SPX) vs. Russell 1000 (.RUI) Year-to-Date (YTD) total returns Source: Eikon from Refinitiv Despite the COVID-19 pandemic, as of the Dec. 16, 2020 close, the

  During the Refinitiv ETF Academy on July 3, 2019, Andrew Walsh, Executive Director, Head Passive & ETF Specialist Sales – U.K. & Ireland at UBS AM, gave a presentation called “Are you making the most of passive investing?” Since he gave a number of hints on how to research exchange-traded funds (ETFs), I thought it would be a good idea to revisit his points because the increasing number of ETF promoters and indices can lead to a steadily growing number of ETFs in the market. The increased competition, especially for “plain vanilla” products, has led to falling prices in

Many financial participants have been so busy with MIFID II that they haven’t understood the impact of the EU Benchmark Regulation, or “EU BMR”, which came into effect on 1st January 2018, and will prohibit EU entities from using an unregulated benchmark in the EU from 1st January 2020.   Who does this impact? Unlike most recent regulations or principles around benchmarks, EU BMR also regulates contributors and users of benchmarks and indices in addition to Administrators such as Thomson Reuters. This means that a large number of market participants need to understand the level of exposure they have to this

A topic widely discussed in the European fund industry is actively managed funds that seem simply to follow an index without adding value for investors, while the management company charges fees for active management—so-called closet trackers. For me it is clear that active funds should add value to investors, either by reducing the risk attached to the market or by generating outperformance compared to their index. In this regard, I agree with the current investigations into these funds by the authorities of some European countries, since retail investors—especially—need protection. But the point I don’t agree with is how the activity

In the aftermath of the financial crisis of 2008 it became obvious that good corporate governance is a key factor in protecting markets and shareholders (owners) of companies from large drawdowns caused by scandal, greed, or other factors of a bad corporate culture. In this regard it is not surprising that corporate governance has become one of the key factors for selecting stocks for all kind of investors, especially investors who are looking for sustainable or socially responsible investments that focus on corporate governance (reflected by the G in ESG [environmental, social, governance] investing). The only part of the asset

Earlier this year, we laid out the top 10 reasons Wealth Advisers and Managers are following investor demand to ESG. The next question: how do ESG, or environment, social, and governance investments, perform? When do these strategies work, and why? Here’s a look at the circumstances under which ESG-related investing works the best, across different asset classes such as stocks and bonds. 10. First, there’s the elephant in the ESG research room: Friede, Busch, and Bassen’s landmark metastudy that reviewed the results of 2,200+ studies from 1970 through 2014. It’s one of the most comprehensive, authoritative looks at the subject,