State Street Corporate

Increased awareness of environmental, social and governance (ESG) concerns is creating exciting opportunities for institutional investors to rethink their traditional investment models. In this paper, we leverage preliminary findings of new research by State Street Global Advisors to examine the momentum behind ESG investing and its potential to generate alpha and mitigate risk in a portfolio over the long term.

For Europe’s asset managers, the financial crisis and an evolving regulatory environment have reinforced the cost pressures that have been building in recent years, creating an urgent need to achieve scale and efficiencies through a focus on core competencies. This paper explores the key trends that are changing the shape of the European investment management industry, including the current wave of M&A activity among asset managers and their efforts to rationalise their operations in the face of rising competitive pressures.

As the first of a series of three Vision Focus papers on European investment management, this report will be followed by a paper devoted to the evolving regulatory environment in Europe. A third paper will examine the shifts driven by the changing needs of investors.

New approaches pioneered by both State Street Global Advisors and State Street Global Markets and focused on market turbulence and convergent/divergent strategies, effectively passed the “live test” presented by those volatile markets. This new paper describes a fundamental updating of Modern Portfolio Theory with new techniques that take advantage of the vast computational and information aggregation capabilities available in contemporary financial markets.

The UCITS IV directive is the latest chapter in the success story of UCITS — the European fund banner that has developed into a global brand. The importance of the new directive cannot be overstated, as it will help Europe’s fund industry achieve greater economies of scale and significant cost savings. Measures to introduce simpler and more consistent information for investors should improve transparency and investor protection. To tap the full potential benefits of UCITS IV, asset managers need to undertake a holistic cost-benefit analysis of their entire European operations. In this Vision Focus paper, we propose strategies for capitalising on the opportunities that UCITS IV brings.