Supplements » Global Industry 2020

New York roundtable: Saying no to the ESG naysayers

Funds Europe – Do you think that some institutions in the US might consider it unpatriotic to invest in China? Are there issues here that go beyond the financial?

Van Eck – The statistic that I look at is a Pew survey of different countries over time, and China is net unfavourable in the US. Compare that to Japan in the 1980s where even though the United States had a large trade deficit with Japan and we had big trade fights about the auto industry, Japan was always viewed as a positive by a significant margin.

Ehret – At the same point in time, most institutional investors don’t have specific investments in specific countries outside of maybe the United States.

Jones – Do you think that any allocation to China on behalf of US institutional investors, even over time, may be more tactical and opportunistic than strategic?

Ehret – It should be a strategic allocation by people because it’s an incredibly important country and economy. Certainly, there’ll be some tactical elements applied there.

Van Eck – People don’t have the tools to understand what’s going on in China if you’re not an expert. There’s a lot of misleading news flow and a lot of investors don’t have an ability to be tactical. It’s hard, even if you know a sector super-well and have high conviction, but especially with China.

Funds Europe – In terms of talking to fund selectors/fund distributors, do you think the conversation about China would differ between selectors in a blue state versus selectors in a red state?

Garland – Not at all. We are now seeing the research teams at the wire houses creating model portfolios with a separate allocation to China. What I see from fund selectors globally is they’re looking at China as a separate allocation and we’re now having more discussions not just about equities but also fixed income, which is fascinating.

Funds Europe – Last year, Jan van Eck told the US roundtable that the concentration of ownership of corporate America by the top four asset managers owning 20%-plus of the stock of a lot of public companies is “going to be a big issue at some point”.

Van Eck – It’s still going to be a front-burner issue. The way it has manifested itself politically this year has been the antitrust concerns around the tech giants. The big asset managers are only getting bigger in our industry.

Ehret – This bleeds into your next question, but it’s important. This concentration is really driven by passive managers, and this is where ESG really becomes a lightning rod. When you’re active, you can choose not to own something.

Coldren – Our institutional investors feel like that issue drives a lot of volatility. As an active asset manager, we view it from the standpoint, a little bit different than passive in that our active managers, if they’re in a company and they’re not happy with it, they have the ability to, as our affiliates would say, vote with their feet. We run institutional client surveys and we get a lot of feedback on this topic, that people do have concerns about it and think it drives volatility.