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Stewardship a key point of competition for passive asset managers, says DWS-sponsored pensions fund survey

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Eighty-four per cent of pension funds regard stewardship practices as pivotal to improving the quality of beta – investment returns generated by taking broad, passive exposure to a market index – while generating positive environmental, social and governance spin-offs, according to a new DWS-sponsored research report.

Of 127 pension funds surveyed globally by CREATE-Research on behalf of DWS, 56 per cent stated that a manager’s capacity and track record in fulfilling the stewardship goals of its clients is taken into account to a ‘large extent’, with 27 per cent taking account of stewardship to a ‘medium extent’, and only 10 per cent taking account of it to a ‘small extent’ and 7 per cent not at all.
 
Stewardship involves stockholders taking a long-term strategic interest in guiding the companies they are invested in via active engagement at a number of levels, including, for example, voting at shareholder meetings.
 
The report also found that the fastest growing part of the passive investment market, from the pension fund perspective, will be solutions with strong tilts towards ESG (environmental, social and governance).

In addition, some 60 per cent of pension funds surveyed regard stewardship as ‘very important’, while 80 per cent expect stewardship demands on their passive asset managers to increase, while passive funds are advancing into the core part of pension fund portfolios, leaving specialist or illiquid strategies to generate alpha.

Sixty-six per cent of survey respondents meanwhile stated that passive investments are part of their ‘already mature’ portfolios. And pension fund use of ETFs is increasing, with 26 per cent of respondents citing ETFs as their preferred passive investment tool, up from 23 per cent last year.
 
“As one of the world’s most established providers of passive investments, and one which has put in place active stewardship on passive funds, we welcome this confirmation that pension funds view stewardship as a key differentiator while also increasingly treating passive solutions as mainstream in their portfolios,” says Simon Klein, DWS’s Head of Passive Sales for Europe and Asia.

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