Do Hedge Funds Create Value? 3 Lessons From Danone And Unilever

Hedge funds do not have to disclose to the SEC any intentions to exert control of a company if they own less than 5% of a company. These small stakes can still have huge impact, as we have seen at corporate giants like Exxon and Nestle. Even small hedge funds can have significant influence if…

Are Enhanced Index Funds Enhanced?

Edwin J. Elton (NYU), Martin J. Gruber (NYU), and Andre B. de Souza (St. John’s University) have a new study about “enhanced” index funds. Of course the whole idea of index funds is that they involve no enhancements at all; they just track an index like the S&P 500. But “enhancements” have become increasingly popular…

NYU Stern’s free “ESG study” database – ESG Professionals Network

NYU’s immeasurably comprehensive and instantly indispensable database includes 1400 ESG-related studies and provides the following vital conclusions: Time Matters – Improved financial performance due to ESG becomes more noticeable over longer time horizons. Investment Strategy Beats Negative Screening – ESG integration as an investment strategy performs better than negative screening approaches. Downside Protection – ESG…

Guest Post from Jim McRitchie: The Giant Shadow of Corporate Gadflies

We are very grateful to Jim McRitchie for allowing us to share his excellent blog post responding to an academic paper on individuals like Jim who file shareholder proposals. We hope the authors will talk to Jim and some of the other “gadflies” before they do their next update. The Giant Shadow of Corporate Gadflies…

Paper: ESG Shareholder Engagement and Downside Risk

A new paper from Andreas G.F. Hoepner, Ioannis Oikonomou, Zacharias Sautner, Laura T. Starks, and Xiao Y. Zhou asks “whether engagement on environmental, social and governance (ESG) issues can benefit shareholders by reducing firms’ downside risk, measured using the lower partial moment and value at risk. Using a proprietary database, we provide evidence supporting this hypothesis….

Should a Pension Fund Try to Change the World?

In a new case study, Harvard Business School professors Rebecca Henderson and George Serafeim discuss the efforts of Hiro Mizuno, CIO of GPIF, the Japanese Government Pension Investment Fund, one of the largest pools of capital in the world, to integrate Environmental, Social and Governance (ESG) issues into every aspect of GPIF’s portfolio. Mizuno believed the only way to…

Agency Conflicts and Short- vs Long-Termism in Corporate Policies

The paper demonstrates that the optimal incentive contract generates short- or long-termism in corporate policies, defined as short- or long-term investment levels above the levels attainable in the absence of agency frictions. In other words, short- or long-termism can be an optimal response to the dual agency problem over the short and long run. Long-termism…

Larker and Tayan Re-Discover the Governance Wheel

Stanford’s David F. Larcker and Brian Tayan have a new paper called Loosey-Goosey Governance: Four Misunderstood Terms in Corporate Governance in which they appear to think they’ve discovered what everyone has understood forever — that there are limits to structural solutions and that checklists of best practices are not especially helpful. We were very clear…