|Day's Range||2.4500 - 2.4500|
A company that ignores ESG risks could incur significant costs that jeopardizes its ability to earn long-term, sustainable profits.
Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its eighth annual Global Fund Flows Report examining worldwide 2019 mutual fund and exchange-traded product (ETP) fund flows. Overall, long-term global flows (excluding money-market funds) nearly doubled in 2019 to $1 trillion. On a net basis, nearly all $1 trillion in long-term flows went into fixed-income funds, which received record inflows and surpassed the prior record of $869 billion set in 2017.
(Bloomberg Opinion) -- It’s not easy being green. Not as a bond issuer, a fixed-income fund manager or as an individual investor. Sure, there are Green Bond Principles for governments and companies, but they’re voluntary guidelines, which helps explain why just $271 billion of the $465 billion in global “sustainable debt” issued last year was defined as green, according to Bloomberg New Energy Finance data. For mutual funds, the Bloomberg Barclays MSCI Global Green Bond Index is one of the best approximations of the market, but it has just 457 members, less than one-fourth the number in the U.S. high-yield index, making it difficult to track and heavily weighted to a few European countries.To top it off, investors interested in climate-related investing have to wrap their heads around socially responsible investing, or SRI, and how it differs from ESG, which attempts to identify leaders in environmental, social and governance policies. My Bloomberg Opinion colleague Nir Kaissar recently wrote about the two camps. Suffice to say, it can all be enough for the average investor to give up and just go with the highest-returning option, values be damned.Perhaps that’s why many of the biggest fixed-income funds that are considered some form of “green”(1)choose to simplify matters. Among the five with more than $1 billion of assets, four consider the Bloomberg Barclays U.S. Aggregate Bond Index (or a subset of it) as their benchmark. That pits them against competitors like the $200 billion Vanguard Total Bond Market Index Fund, the $13.2 billion Guggenheim Total Return Bond Fund and the $13 billion DoubleLine Core Fixed Income Fund, among more than 100 others.“The main misperception of this space is you sacrifice performance,” said Stephen Liberatore, head of Nuveen’s responsible fixed-income strategy team and manager of the $4.7 billion TIAA-CREF Social Choice Bond Fund, the largest such portfolio as measured by Morningstar Inc. Showing that an ESG fund can beat the aggregate index and “a true core fixed-income peer group, not an ESG impact peer group, is what changes people’s minds over time.”Pacific Investment Management Co.’s Total Return ESG Fund, with $1.5 billion in assets, is handled in much the same way. “There’s no reason for there to be a difference in macro-risk factors in the ESG version” compared with the traditional total return option, said Scott Mather, chief investment officer of U.S. core strategies. “What’s different is how we go about composing the line items, how we populate the portfolio with individual bonds.”What was evident after speaking with these fund managers is that the investing world is rushing to cater to a population of investors that I’d call the “green-curious.” That is to say, people who want to feel as if they’re making a difference with their money but aren’t willing to accept significantly higher volatility or fees to do so.Consider, for example, that some of the biggest single holdings in ESG fixed-income funds are U.S. Treasuries. To green-bond purists, that decision would seem questionable at best, given that President Donald Trump pulled the U.S. out of the Paris accord on climate change, among other things. Debt issued by countries from France to Chile to Korea has been earmarked specifically for sustainable projects. Treasuries, by contrast, are broadly sold to finance the nation’s budget deficit, projected to top $1 trillion this fiscal year.The counterargument is that without some exposure to the biggest and most-liquid bond market in the world, it would be tougher to track the aggregate benchmark and raise cash when needed. Plus, so far in 2020, Treasuries have been a winner: The Bloomberg Barclays U.S. Treasury Index gained 2.4% in January, beating both investment-grade and high-yield corporate bonds as well as the S&P 500 Index.This will probably be the norm, at least until the sustainable-bond market in the U.S. matures. It’s true that 2019 marked new entrants, like PepsiCo Inc.’s inaugural $1 billion green-bond deal and Verizon Communications Inc.’s first-ever green bond, also for $1 billion. But that’s hardly enough to tip the scales. America still lags behind the rest of the world in adapting to interest in green investing mandates: Overall, just 9.6% of the green-bond index is from the U.S., compared with 39.4% for the Bloomberg Barclays Global Aggregate index, by far the largest weighting in the $57.8 trillion benchmark.It’s worth noting that when it comes to climate change, the Federal Reserve has long stayed in its lane while the European Central Bank has swerved. ECB President Christine Lagarde said last month that climate change must be thoroughly debated among monetary policy makers and that even “green quantitative easing” could be an option. There’s a “danger of doing nothing. Failing to try is already failing,” she said.Fed Chair Jerome Powell, in the question-and-answer segment of his press conference last week, said that the central bank would probably sign on to the Network for Greening the Financial System “at some point.” He said that it falls within the central bank’s purview to make sure the financial system is resilient to any climate risks, “but not the overall response of society to climate change. That’s not us.” For those U.S. bond investors who want something closer to a pure green fund than the big ESG options, Pimco started its Climate Bond Fund (ticker PCEIX) in December. It considers the dollar-hedged green-bond index its benchmark and has $5 million in assets — a modest sum for a firm that oversees almost $2 trillion. Mather said he expects the fund to grow like others at Pimco, ideally quickly scaling up to the $50 million to $100 million range that he considers optimal for efficiency.Even in that fund, “green bonds are only a subset of companies addressing the climate issues,” Mather said. “We don’t know exactly how the markets will evolve and how quickly the changes will take place, and we want to basically have a strategy that can take advantage of all those opportunities.”Mather and Liberatore have both noticed a noticeable shift in buzz around sustainable investing during the past year. Certianly, BlackRock Inc. Chief Executive Officer Larry Fink’s annual letter to America’s CEOs, which declared that the world’s largest money manager would be “making sustainability integral to portfolio construction,” amplified that sentiment.In a report this week, Moody’s Investors Service said it expects green, social and sustainability bond issuance to hit a record in 2020 because investors “are prioritizing the incorporation of ESG considerations and sustainability into their investment decisions and risk management.” That should support “further growth and innovation” and help diversify the market in terms of industries and regions.“Historically, the concept of a green bond was really the purview of a supranational,” Liberatore said. Now, they’re getting “investors’ dollars closer and closer to the actual end output and impact. That’s really the most exciting part of the space.”I can certainly see why it would be exciting for money managers to dig into projects they believe in. But the way funds are set up now reflects a prudent balance between novel opportunities and predictable performance. The sustainable debt market is still very much in its infancy, and investors need to feel comfortable walking before they can run.(1) This is using Morningstar Inc. criteria, which includes the following types of funds: ESG focus funds:Those that make sustainability factors a featured component of their processes for both security selection and portfolio construction. This group is the largest, and the funds in it tend to be active owners, engaging with companies and supporting — and sometimes sponsoring — ESG-related shareholder resolutions. Impact/thematic funds: Focus on broad sustainability themes, and on delivering social or environmental impact alongside financial returns. Sustainable sector funds: Focus on investment opportunities that contribute to, and aim to benefit from, the transition to a green economy in areas like renewables, energy efficiency, environmental services, water, and green real estate.To contact the author of this story: Brian Chappatta at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today announced its acquisition of Hueler Analytics' Stable Value Comparative Universe Data and Stable Value Index. Terms of the transaction were not disclosed.
The boost in satisfaction workers get from an improved lifestyle that can be afforded by a big raise is fleeting but, according to a Morningstar report, the accompanying “lifestyle creep” can last forever and tarnish retirement.
A version of this article previously appeared in the November 2019 issue of Morningstar ETFInvestor. It's important to measure the performance of the Analyst Ratings, not only to gauge their efficacy, but also to identify ways we might improve them. A previous study published by Jeff Ptak, Morningstar's global head of manager research, showed that the Analyst Ratings for mutual funds performed fairly well from December 2011 to March 2019.
Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today reported estimated U.S. mutual fund and exchange-traded fund (ETF) flows for full-year and December 2019. Despite the S&P; 500 gaining 31.5% in 2019, active U.S. equity funds saw $41.4 billion in outflows, the sixth year of net outflows during the decade-long bull market. Meanwhile, passive U.S. equity funds had $162.8 billion in inflows, finishing the year with 51.2% market share based on total assets. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund, and net flow for U.S. ETFs shares outstanding and reported net assets.
CHICAGO , Jan. 7, 2020 /PRNewswire/ -- Morningstar, Inc. (MORN) today announced it has appointed Ron Bundy to lead the evolution and growth of its global Morningstar Indexes business. Bundy joined the firm in December as managing director, Morningstar Indexes. "We are fortunate Morningstar Indexes has grown to a position where we can attract such accomplished leadership," said Kunal Kapoor , chief executive officer, Morningstar.
Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today reported estimated U.S. mutual fund and exchange-traded fund (ETF) flows for November 2019. Overall, U.S. equity funds totaled $2.9 billion in outflows, which was modest compared to October's $14.5 billion in outflows. Morningstar estimates net flow for mutual funds by computing the change in assets not explained by the performance of the fund, and net flow for U.S. ETFs using changes in shares outstanding.
Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its biennial global study of investor returns, "Mind the Gap," which measures how opportunely investors have timed their fund investments. The study estimates the performance of the average dollar invested in a fund and compares it to the fund's time-weighted return. The difference, or "gap", represents the impact that the timing of investors' purchases and sales had on the investment outcomes they achieved. The study finds that the return on the average dollar invested in funds lagged the average fund's return in most of the seven markets studied.
We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat […]
Stocks and bonds, domestic and international—all have posted nicely positive returns, along with real estate investment trusts and precious metals. Real assets, such as commodities and energy-related master limited partnerships, have been among the few downers. A 60/40 mix of the (ticker: SPY) and (AGG)—exchange-traded funds that track the most widely used benchmarks for the U.S. equity and fixed-income markets—have returned 19.20% for the year, through Wednesday, according to (MORN) That’s the sort of showing that would please most equity-only investors in a typical year, although putting all your chips in the SPDR ETF would have generated a 26.36% return.
The board of directors of Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today declared a quarterly dividend of 30 cents per share. The dividend is payable Jan. 31, 2020 to shareholders of record as of Jan. 3, 2020. The 7.1 percent increase from the prior quarterly rate of 28 cents per share results in an annualized dividend of $1.20 per share compared with the prior annualized rate of $1.12 per share.
PitchBook had about 300 employees and more than 1,000 clients when it was launched in 2007. It now has about 4,500 clients.
It’s hard to predict the fate of the U.S.-China trade war just before a new round of U.S. tariffs is set to punish Chinese imports.