NEWSLETTER of November 29, 2024

The following content has been added at finexpert:

Heidrick & Struggles
BOARDS AND SOCIETY: HOW BOARDS ARE EVOLVING TO MEET CHALLENGES FROM SUSTAINABILITY TO GEOPOLITICAL VOLATILITY
Boards of directors are confronting an ever-expanding list of critical, complex topics—many of which reflect powerful external trends and disruptions. For the past few years, that list has been driven by an increased urgency to address climate and sustainability issues, and that imperative continues. But other issues—such as the rising importance of generative AI (GenAI) and intensifying trade and geopolitical disruptions — have also become a central part of the board agenda. These interconnected dynamics are forcing directors to navigate an increasingly unpredictable environment filled with conflicting and often politically charged demands. BCG, the INSEAD Corporate Governance Centre, and Heidrick & Struggles have teamed up to understand how boards are responding to these complex trends and disruptions. >more

Amundi
2025 INVESTMENT OUTLOOK
New forces are reconfiguring the global economy. While the big shocks of the past five years have largely worked their way through the system, geopolitics and national policy choices are creating a more fragmented world. Monetary policymakers have so far done a good job of curbing high inflation without slamming the brakes on growth. The world economic outlook is therefore benign and global price pressures are expected to abate further, allowing major central banks to keep cutting interest rates. However, the risk of inflation remains, and the Federal Reserve may need to adapt to a potential shift in US policies. >more

Thinking Ahead Institute
THE ASSET OWNER 100 – 2024
The Asset Owner 100 is a Thinking Ahead Institute study which gathers data on the total assets of the top 100 asset owners around the world. Though not included in the ranking, the study also presents the total assets for the top 10 insurers and the top 10 foundations and endowments. The study reveals the world’s 100 largest asset owners are now responsible for US$ 26.3 trillion as of the end of 2023; experiencing an increase in assets of 12.3% compared to the previous year. Sovereign Wealth Funds (SWFs) remain a dominant force among other types of asset owners, now managing 38.9% of the assets among the AO100. In comparison, pension funds, while still forming the largest assets under management by fund type (51.2%), saw the smallest growth rate, with assets held rising by 8.9% from the previous year. >more

Dechert LLP
2025 GLOBAL PRIVATE EQUITY OUTLOOK
Our research, produced in conjunction with Mergermarket, provides compelling insights into an industry that has been through a period of seismic change. After 15 years of ultra-low interest rates, the PE sector has had to adjust to more normal borrowing costs over the last three years – and to endure a period of almost constant geopolitical volatility, economic turmoil and industry upheaval. Against such a backdrop, our research provides crucial context. It represents an opportunity for PE firms to take stock – to see their industry through the lens of their peers and Dechert’s own PE practice. Some 100 global firms were generous enough to give their time to this research. Taken in aggregate, their response provides a wide-ranging snapshot of the PE landscape. >more

BEYOND ESG: EXECUTIVE PAY METRICS AND SHAREHOLDER SUPPORT
Nickolay Gantchev, Mariassunta Giannetti, and Marcus Hober
2024
We document that executive compensation contracts feature a multitude of market, earnings, operating, and ESG metrics and that the increase in ESG metrics has been accompanied by a higher propensity to use operating metrics. These developments are particularly pronounced in companies with volatile returns, recently appointed CEOs, and new active blockholders, such as activist hedge funds and private equity investors. Compensation metrics do not appear to have a large effect on actual payouts to executives and on the sensitivity of pay to market, earnings, and ESG performance, but rather aim to create consensus among shareholders on the proposed pay and the overall corporate strategy. >more

COVENANT AI - NEW INSIGHTS INTO COVENANT VIOLATIONS
Vanessa Krockenberger, Anthony Saunders, Sascha Steffen, and Paulina Verhoff
2024
This paper introduces CovenantAI, a novel artificial intelligence (AI)-powered tool that tracks SEC-reported covenant violations with improved accuracy over existing text-search methods, covering data from 1996 to 2022. It accurately identifies amendments, waivers, and technical defaults, providing a detailed timeline of covenant breaches. We use a "quasi" regression discontinuity approach to analyze the effects of these violations on key firm outcomes such as investments, employment, or credit access, revealing complex patterns and pronounced effects during economic downturns such as the COVID-19 pandemic. The changing loan market, resembling bond markets with the rise of CLOs and secondary trades, has decreased covenant reliance and violations among non-investment grade firms. >more