Investor Relations Week: BlackRock heads to Florida, diversity in the S&P 500 and retail investors miss out on active outperformance
– The Wall Street Journal (paywall) reported that BlackRock, the world’s largest fund management company, is opening a satellite office in South Florida to house a senior executive and dozens of other employees, joining a “corporate migration financial” to the state. Rick Rieder, head of fixed income at BlackRock, which oversees about $1.7 billion in assets, or about 20% of the company’s total assets, reportedly owns a home in Palm Beach County and is expected to work in the new West Palm Beach office space while in Florida, the newspaper said, citing “people familiar with the matter.” About 35 more BlackRock employees are expected to start working there early next year, according to BlackRock.
– CNN reported that, for the first time, every company listed on the S&P 500 has at least one racial or ethnic director. About 11% of S&P boards were not diverse in 2020. Monday also marked an important deadline for all Nasdaq-listed companies: They must complete a board diversity matrix that includes the total number of members of the company’s board of directors and how these board members self-identify. regarding gender, race, ethnicity and LGBTQ+ status. The results will be made public through proxy statements for the annual meeting or on company websites.
From August 2023, publicly traded companies must have at least two diverse board members or explain why they are not meeting this diversity goal.
“Disclosing this information to investors allows shareholders to support companies that embody their ideals and withdraw investments from those that do not,” said Rep. Carolyn Maloney, D-New York, who chairs the committee. the House on Oversight and Reform, in a statement praising the move. “Beyond moral and common sense, increased diversity also makes financial sense. Studies have repeatedly shown that companies with more diverse leadership are better positioned to succeed.
– According to FinancialTimes (paywall), retail investors miss out on the outperformance of active funds over passive funds because they pay higher fees than institutional investors. New research cited by the paper shows that different fee levels mean that fund share classes accessible to institutional investors have outperformed passive ones, but retail investor share classes have underperformed, a group has found. of four Dutch researchers. The research paper, Fund Selection: Sense and Sensibility, is the result of an analysis of the performance of equity and fixed income UCITS funds based in Luxembourg and Ireland between 2008 and 2020.
The performance of actively managed funds, both gross and net of costs, was compared to passive funds and benchmarks, with results weighted by fund assets to reflect where most client funds were held, note the document.
– CityWire reported that Ruffer Investment Company used the July rally to reduce its direct equity exposure. Manager Duncan MacInnes argued that the rebound in equities was based on the markets’ assessment of the Fed’s abandonment of monetary tightening, with interest rate futures priced in a likely drop in interest rates. interest from the central bank early next year. But he sees that outcome as unlikely in the near term as inflation continues to rise faster than the key interest rate, the publication said.
He quoted MacInnes as saying, “We have experienced many ‘unprecedented’ events over the past few years. But it would be truly unprecedented to slow the economy enough to drive down the highest inflation rate in 40 years with a post-inflation policy rate that never turns positive. This bear market is not over and we believe we are entering its most dangerous phase.
– According to WSJnew general data on the salaries of college graduates who received federal student aid show a gender pay gap soon after entering the workforce, even among those who earned the same degree from the same school.
The data, which covers about 1.7 million graduates, shows that the median salary of men exceeded that of women three years after graduation in almost 75% of the approximately 11,300 undergraduate and graduate programs. in about 2,000 universities. In nearly half of the programs, the median earnings of male graduates exceeded those of female graduates by 10% or more, a WSJ analysis of 2015 and 2016 graduate data shows.
For example, men who earned an undergraduate degree in accounting from Georgetown University earned an average of $155,000 three years after graduation, a 55% premium over their peers at class, according to the analysis.
– According to a new report from SPACIsder, according to Institutional investor. These Spacs represent $80.6 billion in capital that is now held in trust, but would be returned to investors. The publication says that under the SEC’s proposal, a Spac would have to announce a deal within 18 months from the date of its IPO and close within 24 months to avoid falling foul of the IPO law. 1940 on investment companies.
“As investment firms, Spacs’ activities would be severely restricted and subject to very onerous compliance requirements,” wrote Kristi Marvin, founder of SPACInsider and author of the report.
– The FT reported that UK power producers will come under pressure from ministers to invest their ‘windfall profits’ in new green energy projects, rather than handing out the windfall to shareholders. Some have made huge profits from soaring electricity prices that have risen alongside soaring gas prices, even if the electricity they produce comes from renewables or nuclear power. Chancellor Nadhim Zahawi has reportedly ‘nurtured’ the prospect of hitting power producers with a new windfall tax if they don’t invest their profits in renewable energy schemes.
– Hedge funds should start giving the government significantly more information about their investment strategies as part of an SEC proposal to better monitor risks to the financial system, said Bloomberg (pay wall). The news agency said the expansion of confidential filings that large managers must file quarterly with the SEC “would mark one of the biggest increases in regulation for the private funds industry in a decade.” , describing the effort as “the latest move by regulators in the Biden administration to clamp down on a relatively opaque corner of finance,” they say, may have major impacts on markets. In January, the SEC took a step forward to force large hedge funds and private equity firms to report large losses and redemptions more quickly.The regulator is also considering ways to make fees more transparent.
– In other SEC news, the agency proposed new rules aimed at preventing conflicts of interest in the management and governance of clearinghouses, Reuters (paywall) reported. Under the SEC’s proposal, registered clearing houses would have to disclose more details about board composition, independent directors, and nominating and risk management committees, among other details.
“I believe these rules would help build more transparent and trustworthy clearinghouses,” SEC Chairman Gary Gensler said in a statement. “This, in turn, would help ensure the resilience of our markets, protect investors and build confidence in our markets.” The SEC’s plan would require clearinghouses to identify, mitigate or eliminate conflicts of interest involving directors or senior executives, and document those actions.
– The International Sustainability Standards Council (ISSB) said it received more than 1,300 comment letters on its two proposed sustainability reporting standards. The ISSB said it received more than 600 responses to its draft climate disclosure standard and nearly 700 responses to its draft general requirements disclosure standard. During the 120-day comment period, ISSB representatives participated in more than 400 outreach events, engaging with thousands of stakeholders around the world.
Comments came from a variety of stakeholder groups, including academics, accounting bodies and audit firms, investors, preparers, public interest bodies, regulators and standard setters. “I am encouraged by the amount of feedback we have received on our proposals,” said ISSB President Emmanuel Faber. “Global solutions require collective action, and the feedback we’ve received provides a critical foundation upon which to establish sustainability disclosure standards that provide a global baseline for capital markets.”
– More than 150 pieces of legislation related to blockchain, decentralized finance, cryptocurrencies, digital or virtual currencies and other digital assets have been introduced since the start of the last Congress, reported Media Markets, adding that these pieces of regulation should be better aligned if passed, according to Moody’s Investors Service. The rating agency said in a report that a clear regulatory and supervisory framework with the potential to prevent fraudulent activity and provide clear guidance to enable businesses to innovate would be positive for credit, as it would protect consumers and ensure that the sector does not become a source of financial revenue. instability, while allowing the realization of all the potential benefits of the crypto industry.