Hagy has more than seven years of experience in retirement
plan consulting. Before coming to Assurance, Hagy worked for a
retirement-focused consulting firm, where she helped mid-market plan sponsors
optimize their retirement programs and remain in compliance.
Hagy specializes in helping plan sponsors navigate the challenges
of fiduciary responsibility, and she will have a dedicated support team that
focuses on meeting high standards for client service. Her department addresses
plan fee and design benchmarking, investment guidance, compliance support, education strategies, and overall plan sponsor best practices. She will be based
in the firm’s new location in downtown Chicago.
Hagy holds a bachelor’s degree in philosophy from the
University of St. Thomas, as well as FINRA Series 6, 63 and 65 licenses, and an
Illinois insurance license. She is pursuing an accredited investment fiduciary
(AIF) designation.
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Nearly nine in 10 asset managers polled for a recent
Cerulli Associates report view increasing attention to environmental, social,
and governance (ESG) strategies as a lasting trend.
Although many investment managers see the growth of ESG as a
permanent shift that will influence the long-term investment strategies they
implement for clients, most managers only consider it to be somewhat important
for managers to offer ESG capabilities today. Cerulli notes this is a significant
development, however, as most asset managers have historically thought of
socially responsible investing as a niche area that appealed only to religious
groups and certain other mission-based, nonprofit organizations.
Today, managers are observing increased demand for ESG from
all types of clients and prospects, Cerulli says, especially in the
institutional and retirement planning channels (see “Running
the Fund: Looking Ahead Responsibly”). As Cerulli explains, institutional
sales teams increasingly report that large asset holders, such as defined
contribution and defined benefit retirement plan sponsors, are inquiring about
the potential benefits and drawbacks of ESG strategies.
Cerulli says request-for-proposal (RFP) teams at investment
management firms are reporting a significant rise in the number of RFPs with
embedded ESG-related questions. The questions encompass several areas, from the
fiduciary implications of implementing an ESG portfolio to the potential
environmental or political risks that can be addressed by ESG screening
strategies.
As
explained by Cerulli, ESG investing strategies can be enacted in a variety of
ways. One common approach is to apply “ESG screens” to a portfolio, through
which the manager cuts out investments in securities that are sensitive to
things like water shortages, food scarcity, or social unrest/injustice. Cerulli
researchers suggest there is increasing acceptance among institutional
investors and asset managers that ESG factors can have a material impact on the
security-issuing company’s financial well-being, as well as overall capital
market performance (see “Running the
Fund: Win-Win”).
Some industry professionals point to the long-term nature of
the potential impact of ESG factors on a given company or security as dilutive
of ESG’s importance in the portfolio-building process, Cerulli explains. This
is an especially important matter in the retirement planning context, wherein
plan sponsors and other named fiduciaries must make all investing decisions in
the best financial interest of their participants. The Department of Labor (DOL)
has even issued guidance reminding plan sponsors that ESG factors, when they
are not clearly material to the performance of a given security, can at most
serve as a tie-breaker between economically indistinguishable investment
options.
But as Cerulli explains, more retirement plan sponsors are
linking the long-term nature of their participants’ investing interests with
the growing importance and materiality of ESG factors. A given retirement
plans’ termination date often extends far into the future, if one is set at
all, so it becomes challenging to assess whether long-term problems like
climate change or water scarcity should factor into investing decisions made in
the short-term.
Whatever the case, many asset managers have witnessed a
moderate (65%) or significant (13%) increase in demand among clients and
prospects for a written commitment to The United Nations-supported Principles
for Responsible Investment (UNPRI) Initiative. As Cerulli explains, UNPRI
Initiative signatories pledge to implement a list of best practices for
responsible investing.
Cerulli
says some asset managers are even employing ESG capabilities, and their UNPRI
signatory status, as a differentiator when presenting their approach to
managing risk, generating returns, or both.
Looking to the portfolio building process, many managers
anticipate that the greatest growth potential for ESG among asset classes will
be in U.S. equity (78%) and international equity (74%). Several factors shape
this view of asset class potential, Cerulli says. For instance, U.S. equity and
international equity are among the most commoditized asset classes—so ESG can
be a valuable differentiating factor.
Cerulli observes that private equity and other alternative
investments, such as real estate, operate with greater flexibility and are
bound by fewer liquidity constraints than highly regulated vehicles. This
allows alternatives managers to invest directly in unlisted companies to
facilitate impact investing or other ESG factors, such as shareholder advocacy.
Even with new attention, Cerulli is quick to add that only
about 26% of managers say they receive frequent questions from institutional
clients about ESG issues. Another 32% say they have received a small number of
queries during recent sales or client relationship management efforts, while
42% have seen little or no client attention being paid directly to ESG.
Perhaps for this reason, only about 17% of asset managers
say ESG is already very important. Another 78% say it is somewhat important,
leaving just 4% neutral on the importance of ESG.
More
information about how to obtain the full Cerulli analysis of ESG investing,
contained in the August 2014 issue of “The Cerulli Edge – U.S. Monthly
Product Trends,” is available here.