Over half of investors now incorporate ESG into their fund selection process in some form, according to HFM Insights' latest report, which examines the prevalence and impact of ESG on fund selection and the hedge fund industry.
The 'ESG Trends 2021' report surveyed institutional and private wealth investors in Q4 2020, along with analysis of additional HFM data and UNPRI data to provide insights into the extent investors are considering ESG, determine the adoption of ESG by hedge fund managers and investors in fundraising efforts and fund selection process, among other findings.
It revealed that more than half (53%) of institutional investors now say ESG factors directly impact their decision to invest with a manager, meaning firms with aspirations of attracting a sophisticated investor base can no longer ignore this emerging trend.
Some 58% of European investors incorporate ESG into their fund selection process, compared to 35% for North America and 20% for Asia-Pacific. Equally, 13% of European allocators have a dedicated ESG capital pool, against 8% of North Americans and no Asia-Pacific investors. ESG considerations are still, for now, more prevalent among European allocators.
Analysis of HFM's Billion Dollar Club of larger hedge fund managers and the list of UNPRI signatories indicates that North America is fast catching up. Of the 15% of North American billion dollar-plus AuM managers that are UNPRI signatories, 45% signed up in 2020 alone, as firms in the region become alert to the growing clamour among investors for action on inssues such as climate change and social responsibility.
Pension funds and family offices are also increasingly likely to consider ESG when selecting funds, as younger generations and beneficiaries influence investment decisions more and more. The median amount of capital allocated to firms that became UNPRI signatories grew by 32% after managers signed up and by 47% for firms with a heritage in hedge funds.
HFM Insights, Report, ESG, Hedge funds, Pension funds, Cayman Islands