The institutional investment landscape has changed dramatically over the last twelve months. We see this change as not a simple directional trend or an inconsequential fad – it is a flat out revolution. This transformation is primarily the result of the unprecedented explosion of capital inflows received by passive investors. Moving forward, passive investing will no longer imply quiet ownership or the tranquil acceptance of the status quo.
Regardless of market cap, geography, sector, and in some cases, even performance, management teams now encounter a powerful tidal wave of new complications. We are in the midst of a unique and compelling paradigm shift that corporate management teams must prepare for. Within the context of institutional investing, the traditional definition of “passive” is now archaic and requires a drastic strategic overhaul.
Active management, from a variety of different tactical perspectives, has also been forced to adjust. The recent surge of passive dollars has modified the conventional approach to shareholder risk management. This relatively new pattern has resulted in several critical implications that will inevitably redefine “proficient” within the context of corporate management. Investment ideologies that were once alienated from one another a short time ago now find themselves converging at a rapid pace.
In short, we see the traditional silos once independently operated by shareholder activists, the ESG/SRI movement, and passive investors now displaying more of a collective and unified mindset.
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