Natural capital will be a growth area for investment

2021 ◽  
Keyword(s):  
Natural Capital ◽  
Natural World ◽  
Investment Strategies ◽  
Capital Asset ◽  
Content Type ◽  
Growth Area ◽  
Carbon Offset ◽  
Asset Class ◽  
Asset Managers ◽  
Carbon Offset Projects

Significance Investors are increasingly interested in the financial value of the natural world and how to fit it into their investment strategies. As well as decreasing carbon emissions, the focus is shifting to how to protect nature overall through methods such as reforestation, sustainable agriculture, ocean conservation and increasing biodiversity. Impacts Asset managers are likely to launch an array of innovative nature-linked products. Carbon-offset projects will dominate asset inflows for now, but their attractions are limited and eventually they will be superseded. More banks are likely to introduce nature-based goals within their sustainability-linked loans. The pressure for greater transparency, accountability and measurable metrics will grow in the natural capital asset class.

The “sell in May” effect: an empirical investigation of globally listed private equity markets

2019 ◽  
Vol 45 (6) ◽  
pp. 793-808 ◽  
Author(s):  
Carmen Bachmann ◽  
Lars Tegtmeier ◽  
Johannes Gebhardt ◽  
Marcel Steinborn
Keyword(s):  
Private Equity ◽  
Equity Markets ◽  
Ordinary Least Squares ◽  
Valuable Insight ◽  
Time Varying ◽  
Content Type ◽  
Economic Significance ◽  
Asset Class ◽  
Asset Managers ◽  
Autoregressive Conditional Heteroscedasticity

Purpose The purpose of this paper is to test the so-called “Sell in May” effect in globally listed private equity markets based on monthly data covering the period 2004–2017. Design/methodology/approach Ordinary least squares regressions, generalized autoregressive conditional heteroscedasticity regressions and robust regressions are used to investigate the existence of the “Sell in May” effect in globally listed private equity markets. Additionally, the authors conduct robustness checks by dividing the sample period into two subperiods: pre-financial and post-financial crisis periods. Findings The authors find limited statistically significant evidence for the “Sell in May” effect. In particular, the authors observed a statistically significant “Sell in May” effect when taking time-varying volatility into account. These findings indicate that the “Sell in May” effect is driven by time-varying volatility. By contrast, economic significance as measured by visual return inspection and the magnitude of the estimated “Sell in May” coefficients in combination with their positive signs was found to be considerable. Practical implications The findings are important for all kinds of investors and asset managers who are considering investing in listed private equity. Originality/value The authors present a novel study that examines the “Sell in May” effect for globally listed private equity markets by using LPX indices, offering valuable insight into this growing asset class.

Circular economy investments will rise sharply

2021 ◽  
Keyword(s):  
Climate Change ◽  
Technological Innovation ◽  
Circular Economy ◽  
Natural World ◽  
Middle Income ◽  
Content Type ◽  
Sustainable Investment ◽  
Asset Managers

Significance A circular economy is one that avoids waste and pollution, keeps materials in use and replenishes the natural world, helping to limit climate change and promote biodiversity. Impacts In high- and middle-income nations especially, consumers will have to cut or adapt consumption if the circular economy is to flourish. Asset managers are likely to see more demand for circular economy funds as part of the broader move to sustainable investment. Technological innovation arising from circular economy initiatives could lead to more jobs being created.

Evaluation of Australian industry superannuation fund performance; asset allocation to property

2016 ◽  
Vol 34 (4) ◽  
pp. 301-320 ◽  
Author(s):  
Wejendra Reddy
Keyword(s):  
Asset Allocation ◽  
Dynamic Models ◽  
Performance Measure ◽  
Theory And Practice ◽  
Portfolio Optimisation ◽  
Investment Strategies ◽  
Fixed Income ◽  
Content Type ◽  
Strategic Approach ◽  
Asset Class

Purpose – Property is a key investment asset class that offers considerable benefits in a mixed-asset portfolio. Previous studies have concluded that property allocation should be within the 10-30 per cent range. However, there seems to be wide variation in theory and practice. Historical Australian superannuation data shows that the level of allocation to property asset class in institutional portfolios has remained constant in recent decades, restricted at 10 per cent or lower. This is seen by many in the property profession as a subjective measure and needs further investigation. The purpose of this paper is to compare the performance of the AU$431 billion industry superannuation funds’ strategic balanced portfolio against ten different passive and active investment strategies. Design/methodology/approach – The analysis used 20 years (1995-2015) of quarterly data covering seven benchmark asset classes, namely: Australian equities, international equities, Australian fixed income, international fixed income, property, cash and alternatives. The 11 different asset allocation models are constructed within the modern portfolio theory framework utilising Australian ten-year bonds as the risk free rate. The Sharpe ratio is used as the key risk-adjusted return performance measure. Findings – The ten different asset allocation models perform as well as the industry fund strategic approach. The empirical results show that there is scope to increase the property allocation level from its current 10-23 per cent. Upon excluding unconstrained strategies, the recommended allocation to property for industry funds is 19 per cent (12 per cent direct and 7 per cent listed). This high allocation is backed by improved risk-adjusted return performance. Research limitations/implications – The constrained optimal, tactical and dynamic models are limited to asset weight, no short selling and turnover parameters. Other institutional constraints that can be added to the portfolio optimisation problem include transaction costs, taxation, liquidity and tracking error constraints. Practical implications – The 11 different asset allocation models developed to evaluate the property allocation component in industry superannuation funds portfolio will attract fund managers to explore alternative strategies (passive and active) where risk-adjusted returns can be improved, compared to the common strategic approach with increased allocation to property assets. Originality/value – The research presents a unique perspective of investigating the optimal allocation to property assets within the context of active investment strategies, such as tactical and dynamic models, whereas previous studies have focused mainly on passive investment strategies. The investigation of these models effectively contributes to the transfer of broader finance and investment market theories and practice to the property discipline.

Commodity Exchange-Traded Funds

2018 ◽  
Author(s):  
Christopher Milliken
Keyword(s):  
Portfolio Diversification ◽  
Futures Contracts ◽  
Spot Price ◽  
Exchange Traded Funds ◽  
Investment Strategies ◽  
Regulatory Structure ◽  
Commodity Exchange ◽  
Asset Class ◽  
Exchange Traded Fund

Commodity exchange-traded funds (ETCs), which debuted in 2004, enable investors to access an asset class previously difficult or expensive to access. Although a small segment of the overall exchange-traded fund (ETF) universe, ETCs have grown in popularity with both speculators and investors looking for long-term portfolio diversification. Examples of the types of commodities that are now accessible through ETCs include gold, oil, and agricultural. The literature on ETCs is limited, but academic and industry work has centered on using futures contracts to replicate the performance of the underlying commodities spot price as well as the effect additional capital has had on the integrity of the futures market. This chapter covers this topic by reviewing the growth, investment strategies, and regulatory structure of ETCs as well as the underlying effects these funds have had on the underlying markets with which they engage.

What drives the venture capital investments in China?

2019 ◽  
Vol 13 (3) ◽  
pp. 574-602 ◽  
Author(s):  
Yixi Ning ◽  
Gubo Xu ◽  
Ziwu Long
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Global Financial Crisis ◽  
High Growth ◽  
Investment Strategies ◽  
Stock Market Crash ◽  
Content Type ◽  
Risk Levels ◽  
Aggregate Amount ◽  
A Share

Purpose This study aims to examine the venture capital (VC) industry in China. It has demonstrated a history of high growth with significant variations over time. The authors have examined the trends and determinants of VC investments in China over a 20-year period from 1995 to 2014. They find that the aggregate amount of VC investments, the total number of venture deals and the average amount of venture investments per deal in China are all significantly impacted by macroeconomic conditions (i.e. GDP, export, money supply), technology innovations and financial market indicators (i.e. initial public offerings (IPOs), interest rate, price-to-earnings ratio, etc.). They also find that the 2007 China A-Share stock market crash and the subsequent global financial crisis have motivated VCists in China to adjust their investment strategies and risk levels by allocating more capital to later-stage investments and securing more deals with later-round financings. However, after the 2008 global financial crisis, the China’s venture industry has recovered faster compared to the US counterpart response. Design/methodology/approach The authors first perform trend analysis of VC investments at an aggregate level, by stages of development, and across industry from 1995 to 2014.To test H1 and H2, the authors use multiple regression models with lagged explanatory variables. To test H3, the authors use univariate tests to compare the measures of VC investments at an aggregate level, stage funds ratios, stage deals ratios and financing series ratios during both a five-year and seven-year time windows around the 2007 A-Share stock market crash and the subsequent financial crisis. Findings The development of the VC industry in China has demonstrated a history of high growth with significant variation over time. The authors find that the aggregate amount of VC investments, the total number of venture deals and the average amount of venture investments per deal in China are all significantly impacted by macroeconomic conditions (i.e. GDP, export, money supply), technology innovations and financial market indicators (i.e. IPOs, interest rate, price-to-earnings ratio, etc.). The authors also find that the 2007 China A-Share stock market crash and the subsequent global financial crisis have motivated VCists in China to adjust their investment strategies and risk by allocating more capital to later-stage investments and securing more deals with later-round financings. However, the China VC industry has recovered faster compared to the USA just after the 2008 global financial crisis. Research limitations/implications There are also limitations in the study. The VC data in China in the earlier 1990s might not be very reliable due to the quality of statistics. Therefore, the trend analysis and discussions mainly focus on the time after 2000. Also, the authors cannot find VC financing sequence data for the analysis. Second, there is no doubt that the policy impact from Chinese transforming economic system and government policies on its VC industry is substantial (Su and Wang, 2013). However, they cannot find an appropriate variable to be included in the empirical models to consider this effect. Further study on this area would provide meaningful information. Third, although the authors have done comparison study between the VC industry in China in this study and the VC industry in the US documented in Ning et al. (2015) and discussed some interesting findings, more in-depth research in this area will be very useful. Practical implications The findings have meaningful implications for VCists and start-up companies seeking equity financings in China. VCists should closely monitor macroeconomic and market conditions to make appropriate adjustments to their risk and investment strategies. Entrepreneurs seeking equity financings for their business could also monitor the identified macroeconomic and market indicators, which can help them with their timing and to negotiate a better equity financing deal. VC financing is more likely to succeed when key macroeconomic and market indicators become favorable. Originality/value This paper contributes to the literature by testing the supply and demand theory on the VC market proposed by Poterba (1989) and Gompers and Lerner (1998) from the macroeconomic perspective using 20 years’ VC data from China. The authors also examine how the 2007 A-Share stock market crash and the subsequent financial crisis affected VCists to adjust their risk levels and investment strategies. It provides useful information for international academia and policymakers to understand the quick rise of China VC industry. The authors also find that the macroeconomic drivers of VC industry are somewhat different under different economic systems.

Following momentum and avoiding the “Minsky Moment” evidence from investors on the Financial Instability Hypothesis

2016 ◽  
Vol 8 (3) ◽  
pp. 205-217 ◽  
Author(s):  
Scott Pirie ◽  
Ronald King To Chan
Keyword(s):  
Investment Decisions ◽  
Practical Experience ◽  
Financial Instability ◽  
Investment Strategies ◽  
Momentum Strategies ◽  
Content Type ◽  
Hyman Minsky ◽  
Quantitative Studies ◽  
Regional Markets ◽  
Unstable States

Purpose This study aims to find out how institutional investors use momentum in making investment decisions, and whether their actions are consistent with the Financial Instability Hypothesis of Hyman Minsky. Design/methodology/approach The study discusses the findings of interviews with 25 professional investors from the Hong Kong offices of five global financial institutions. All of the participants have several years of practical experience in global and regional markets. Findings Nearly all the managers interviewed said they use momentum in making investment decisions, and they do this in ways that are consistent with the Financial Instability Hypothesis, in which markets alternate between stable and unstable states. The participants are aware they may contribute to this, but they cannot avoid doing it because of short-term constraints in the present financial system. Originality/value This study adds to our knowledge of how professional investors use momentum in their investment strategies. It complements findings of quantitative studies that show momentum strategies have been profitable in many market settings. It also adds evidence that supports the Financial Instability Hypothesis.

Performance of physical asset management using the analytic hierarchy process

2019 ◽  
Vol 37 (3) ◽  
pp. 327-345 ◽  
Author(s):  
Fawzeia Abdulla Al Marzooqi ◽  
Matloub Hussain ◽  
Syed Zamberi Ahmad
Keyword(s):  
Analytic Hierarchy Process ◽  
Asset Management ◽  
Analytic Hierarchy ◽  
Content Type ◽  
Equal Importance ◽  
The Analytic Hierarchy Process ◽  
Physical Asset ◽  
The Impact ◽  
Hierarchy Process ◽  
Asset Managers

Purpose The purpose of this paper is to explore certain resources, capabilities and competencies needed to improve the performance of physical asset management (PAM). Design/methodology/approach The analytic hierarchy process (AHP) is used to select and prioritize the most appropriate factors for improving performance. A multi-criteria approach is used to analyze and compare the importance of 6 main criteria and 18 subcriteria identified from a survey of relevant literature. Findings The study revealed that not all factors are viewed as having equal importance in improving PAM performance, as three of the main factors attained greater importance among the six factors. Research limitations/implications This study explored the factors required for managing assets only within the third stage of asset lifecycle, that is, the utilization stage. It is recommended that future studies be conducted in such a way as to determine the importance of similar factors in the other stages of the asset lifecycle, or to identify new factors and add new criteria. Practical implications Knowledge of the differential impacts of the factors on the performance of PAM can impact asset managers and decision makers in their allocation of resources and focus their work on the highest-ranked rather than the lowest-ranked factors. Also, AHP used provides an effective mean for asset managers to identify priorities among decision criteria in their organization. Originality/value To date, no study has explored the impact of six combined factors on the performance of PAM. Previous studies have found that these factors each had equal importance. However, their relative ranking in practice and when they appear together have remained unrecognized.

scholarly journals “Mathematics maybe, but not money”

2017 ◽  
Vol 30 (7) ◽  
pp. 1459-1480 ◽  
Author(s):  
Sian Sullivan ◽  
Mike Hannis
Keyword(s):  
Land Use Planning ◽  
Natural Capital ◽  
Economic Values ◽  
Content Type ◽  
Experimental Implementation ◽  
Natural Capital Accounting ◽  
Ecological Accounting ◽  
The Uk ◽  
Biodiversity Offset ◽  
Policy Texts

Purpose The purpose of this paper is to consider and compare different ways of using numbers to value aspects of nature-beyond-the-human through case analysis of ecological and natural capital accounting practices in the UK that create standardised numerical-economic values for beyond-human natures. In addition, to contrast underlying ontological and ethical assumptions of these arithmetical approaches in ecological accounting with those associated with Pythagorean nature-numbering practices and fractal geometry. In doing so, to draw out distinctions between arithmetical and geometrical ontologies of nature and their relevance for “valuing nature”. Design/methodology/approach Close reading and review of policy texts and associated calculations in: UK natural capital accounts for “opening stock” inventories in 2007 and 2014; and in the experimental implementation of biodiversity offsetting (BDO) in land-use planning in England. Tracking the iterative calculations of biodiversity offset requirements in a specific planning case. Conceptual review, drawing on and contrasting different numbering practices being applied so as to generate numerical-economic values for natures-beyond-the-human. Findings In the cases of ecological accounting practices analysed here, the natures thus numbered are valued and “accounted for” using arithmetical methodologies that create commensurability and facilitate appropriation of the values so created. Notions of non-monetary value, and associated practices, are marginalised. Instead of creating standardisation and clarity, however, the accounting practices considered here for natural capital accounts and BDO create nature-signalling numbers that are struggled over and contested. Originality/value This is the first critical engagement with the specific policy texts and case applications considered here, and, the authors believe, the first attempt to contrast arithmetical and geometrical numbering practices in their application to the understanding and valuing of natures-beyond-the-human.

Large-cap vs small-cap portfolio performance: new empirical evidence from ETFs

2019 ◽  
Vol 18 (1) ◽  
pp. 71-94
Author(s):  
Gerasimos Rompotis
Keyword(s):  
Design Methodology ◽  
Portfolio Performance ◽  
Exchange Traded Funds ◽  
Investment Strategies ◽  
Time Data ◽  
Content Type ◽  
Risk Characteristics ◽  
The Usa ◽  
First Time ◽  
Practical Implications

PurposeA well-documented pattern in the literature concerns the outperformance of small-cap stocks relative to their larger-cap counterparts. This paper aims to address the “small-cap versus large-cap” issue using for the first time data from the exchange traded funds (ETFs) industry.Design/methodology/approachSeveral raw return and risk-adjusted return metrics are estimated over the period 2012-2016.FindingsResults are partially supportive of the “size effect”. In particular, small-cap ETFs outperform large-cap ETFs in overall raw return terms even though they fail the risk test. However, outperformance is not consistent on an annual basis. When risk-adjusted returns are taken into consideration, small-cap ETFs are inferior to their large-cap counterparts.Research limitations/implicationsThis research only covers the ETF market in the USA. However, given the tremendous growth of ETF markets worldwide, a similar examination of the “small vs large capitalization” issue could be conducted with data from other developed ETF markets in Europe and Asia. In such a case, useful comparisons could be made, so that we could conclude whether the findings of the current study are unique and US-specific or whether they could be generalized across the several international ETF markets.Practical implicationsA possible generalization of the findings would entail that profitable investment strategies could be based on the different performance and risk characteristics of small- and large-cap ETFs.Originality/valueThis is the first study to examine the performance of ETFs investing in large-cap stock indicesvis-à-visthe performance of ETFs tracking indices comprised of small-cap stocks.

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