NEWSLETTER of July 17, 2020

The following content has been added at finexpert:

BlackRock
2020 MIDYEAR OUTLOOK
We quickly concluded Covid-19 would cause an unprecedented near-term economic contraction – but that an overwhelming policy response would help mitigate the damage and make the cumulative GDP shortfall much smaller than that of the GFC. As a result, we advocated taking advantage of historic opportunities in sustainability in late February and risk assets in strategic portfolios in late March. We have since turned neutral on equities in our strategic framework after the significant rally but keep our overweight in credit. Higher spread levels make up for increased default risk, in our view. >more

Deutsche Bank Research
DEUTSCHLAND-MONITOR BAUFINANZIERUNG Q3/2020
According to the Federal Statistical Office, only 293,002 new dwellings were completed in 2019. Given the sideways movement of mortgage interest rates and presumably further increases in house prices, affordability is likely to decline in 2020. In our view, the house price cycle will last at least until 2022. >more

DWS
HOW BEST TO MEASURE ASSET MANAGERS’ CREDENTIALS WHEN IT COMES TO ESG
If one were to name key industry-wide buzzwords in asset management over the past few years, ‘ESG’ would easily be at or close to the top of the list. In the United States, new money inflows into ESG mutual funds and exchange-traded-funds hit a record high of US$20 billion last year, almost quadruple the number in 2018; in Europe, new inflows of €120 billion into European ESG funds has increased the total assets in European sustainable funds to €668 billion in 2019, 56% higher than that in 2018. The evidence so far this year has been that this trend has continued with ESG funds and indices outperforming their parent benchmarks and ESG ETF equity flows proving to be considerably more resilient that their non-ESG ETF equity counterparts. >more

The World Bank
PANDEMIC, RECESSION: THE GLOBAL ECONOMY IN CRISIS
COVID-19 has triggered the deepest global recession in decades. While the ultimate outcome is still uncertain, the pandemic will result in contractions across the vast majority of emerging market and developing economies. It will also do lasting damage to labor productivity and potential output. The immediate policy priorities are to alleviate the human costs and attenuate the near-term economic losses. Once the crisis abates, it will be necessary to reaffirm a credible commitment to sustainable policies and undertake the reforms necessary to buttress long-term prospects. Global coordination and cooperation will be critical. >more

GOVERNANCE CHANGES THROUGH SHAREHOLDER INITIATIVES: THE CASE OF PROXY ACCESS
Tara Bhandari, Peter Iliev, and Jonathan Kalodimos
2019
We study a regulatory change that permitted shareholder proposals to instate proxy access. It generated over 300 proposals and led more than 250 firms to adopt proxy access from 2012 to 2016. The firms expected to benefit most from proxy access have the most positive market reaction to receiving a proposal. However, proposals and adoptions are not concentrated at these firms, instead being common at large, well-governed firms. We provide evidence of the tactics used by management to resist proxy access at firms that stand to benefit, and demonstrate that shareholders oppose proxy access more where they have large holdings. >more

DO FOREIGN INSTITUTIONAL INVESTORS IMPROVE PRICE EFFICIENCY?
Marcin T. Kacperczyk, Savitar Sundaresan, and Tianyu Wang
2019
We study the impact of foreign institutional investors on price efficiency with firm-level international data. Using MSCI index inclusion and the U.S. Jobs and Growth Tax Relief Reconciliation Act as exogenous shocks to foreign ownership, we show that greater foreign ownership increases stock price informativeness, especially in developed economies. This increase arises from new information that foreign investors bring in, and displacement of less informed domestic retail investors. Finally, we show that foreign ownership, particularly from active investors, increases market liquidity, reduces firms' cost of equity, and increases firms' real investment growth. >more