Conscious consciences: Active managers as the new activists

Is passive investment responsible? Put another way, are long-term institutional investors the new activists?

1 minute read

Miniature people standing with chess pieces on the chessboard

At their core, businesses attempt to combine scarce inputs – capital and labour – in a way that generates an output of greater value than the sum of the combined inputs and in doing so, report profits. However, while profit is the first indication that a business is functioning well, it cannot be the sole objective as this would fail social justice. Companies are responsible to society for the economic and ecological effects of their operations because the activities are complex, and decisions made by companies produce a significant number of interrelated effects in both the economic and social spheres. Capitalism, yes – but ‘capitalism with a human face’, and shareholders have a crucial role to play.

Being responsible stewards of clients’ assets is non-negotiable for us
Euan Munro, CEO Aviva Investors

The rise of passive investment vehicles continues to transform the investment landscape.  However, this transition brings with it a growing question of responsible ownership: lacking a profit motive, passive funds do not have an obvious incentive to hold companies to account and their low fees mean they frequently lack the resources to fulfil whatever environmental, social and governance ambitions they have.  Active fund managers should therefore reassert their role as long-term owners of businesses and reclaim the activist title from shorter-term predatory approaches.  By doing so, active funds can showcase the important benefits that they bring to wider society in addition to their role as price-setters.

Activist investing is a growing focus of our investment process.  We contend that building a proactive and value-enhancing dialogue with management teams is the responsibility of all long-term shareholders.  We pride ourselves in being ahead of the industry in this.  Exploring the elements driving the business, as well as having the ability to change and shape the future through open and constructive management engagement are key parts of our ownership and monitoring process.  Such engagement need not come through a high profile, combative media campaign or other hostile actions frequently seen across the corporate landscape.  As long-term shareholders with direct management access and thoughtful, creative, insights into our owned businesses, we are able to work together with companies to enhance returns for shareholders.

Key risks

For further information on the risks and risk profiles of our funds, please refer to the relevant KIID and Prospectus.

The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency exchange rates. Investors may not get back the original amount invested.

Emerging markets risk

The fund invests in emerging markets; these markets may be volatile and carry higher risk than developed markets.

Derivatives risk

The fund uses derivatives; these can be complex and highly volatile. Derivatives may not perform as expected, which means the fund may suffer significant losses.

Illiquid securities risk

Certain assets held in the fund could, by nature, be hard to value or to sell at a desired time or at a price considered to be fair (especially in large quantities), and as a result their prices could be very volatile.

Concentration risk

The fund invests in a small portfolio of securities. Losses from a single investment may be more detrimental to the overall fund performance than if a larger number of investments were made.

Global Equity Endurance Fund

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Important information

Except where stated as otherwise, the source of all information is Aviva Investors Global Services Limited (“Aviva Investors”) as at November 2019. Unless stated otherwise any opinions expressed are those of Aviva Investors. They should not be viewed as indicating any guarantee of return from an investment managed by Aviva Investors nor as advice of any nature. 

Past performance is not a guide to future performance. 

The Prospectus and Key Investor Information Document (KIID), are available, together with the Report and Accounts of the SICAV, free of charge from Aviva Investors Luxembourg, 2 rue du Fort Bourbon 1st Floor.L-1249 Luxembourg, Grand Duchy of Luxembourg R.C.S. Luxembourg B25708, Aviva Investors, St Helen’s, 1 Undershaft, London EC3P 3DQ The Prospectus is available in English and German. Where a sub fund of the SICAV is registered for public distribution in a jurisdiction, a KIID in the official language of that jurisdiction will be available.

Issued by Aviva Investors Global Services Limited, the Investment Manager to the Fund registered in England No. 1151805.  Registered Office: St Helens, 1 Undershaft, London, EC3P 3DQ.  Authorised and regulated by the Financial Conduct Authority (Firm Reference No. 1191780).