At the 2017 NIRI Annual Conference, Dan Romito, Global Head of Investor Analytics at Nasdaq Corporate Solutions, discussed the evolution and impact of passive investing.
Download Dan’s report There Is Nothing Quiet About Being Passive to learn about the current trends that could potentially impact business strategies.
The emergence of index money has been changing the behavior of institutional investors with index investing. We are seeing a ripple effect with how active long-onlys go about their business, the socially responsible investing (SRI) movement, and shareholder activism. All of these movements are converging to a unified mindset and it is important to understand that you can't think of index money as being passive. There is a wide range of investment styles and it is important to evolve and adapt to the dynamic investing landscape.
Additionally, corporate governance is becoming increasingly important in the investment decision-making process. It is critical to understand the process of corporate governance and how you will quantify it with an evaluation of your investment portfolio. From the SRI standpoint, there is an emergence of capital pools that are SRI focused. Ask yourself, how does the investment profile of the particular corporate overlap with the investment thesis of what that fund is trying to accomplish? Romito explained, “Targeting is more concerned with the behavioral tendencies of people, not necessarily institutional intelligence. Obviously, institutional intelligence is important, but various people have various biases and how they run their profiles is very distinct.”
Watch Dan’s interview from the 2017 NIRI Annual Conference via the Facebook Live video here or below:
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