Investment stewardship
Table of Contents
Investment stewardship
Investment stewardship entails interacting with the businesses in which we have stakes to address opportunities and risks, both company- and market-specific. The team collaborates with regulators, decision-makers, and industry peers to address systemic concerns.
Why is investment stewardship important? It is because it helps to ensure that an investment will be worth its value over the long term. This is especially important for investments intended to be held for a long time, such as retirement savings.
Here we provide an overview of investment stewardship.
What is investment stewardship?
Investment stewardship refers to the prudent management of money that we distribute on our customers’ behalf in order to provide long-term positive effects for society, the economy, and the environment.
In simple words, investment stewardship is the professional management of investments on behalf of clients. We can also define it as the process of ensuring that investments are managed to meet the clients’ specific goals and objectives.
Understanding investment stewardship
There are several different ways to approach investment stewardship. One common approach is to periodically review the performance of the investment and make adjustments as needed. This might involve selling off losing investments and reinvesting in more of the promising ones.
Another approach is to diversify one’s investments across a number of different asset classes. This can help to mitigate the risk of losing money on any single investment.
Having a strategy and following it are the most important aspects to consider. Always remember investment stewardship is not something that can be done haphazardly. And it requires discipline and a commitment to long-term success.
Objective of investment stewardship
The objective of investment stewardship is to ensure that investments are managed in a way that serves the expectations of the investors. This mainly includes ensuring that the investments are safe, sound, and profitable. Other objectives are:
- To protect and enhance the value of shareholders’ investments.
- To ensure that companies are run responsibly and sustainably.
- To promote good corporate governance.
Investment stewardship also includes engaging companies on environmental, social, and governance (ESG) issues.
Importance of investment stewardship
There are a number of reasons why investment stewardship is important. First, it helps to ensure that investments are managed in a way that is consistent with the client’s goals. This is important because it helps to ensure that the client’s goals are met and that their money is being used in a way that is consistent with their wishes.
Second, investment stewardship helps to ensure that investments are managed in a way that is efficient and effective. This is important as it ensures that the client’s funds are being utilized in a way that will most likely produce the intended outcomes.
Third, investment stewardship helps ensure that investments are managed in a transparent and accountable way. This is important because it helps to ensure that the clients know what is happening with their money and that they can hold the investment manager accountable for the results.
Fourth, investment stewardship helps to ensure that investments are managed in a way that is ethical and responsible. This is important because it helps to ensure that the client’s money is being utilized in a way that is consistent with their values.
Roles and responsibilities of stewardship
We know that investment stewardship is the process of monitoring and managing investments to ensure that they meet the investor’s goals and objectives. This process includes ensuring that the investments are properly diversified, generating the desired return, and being managed in a way that is consistent with the investor’s risk tolerance.
The investment stewardship process is typically overseen by an investment committee or board of directors. This group is responsible for setting the organisation’s investment policy and monitoring the investment performance. They may also delegate some investment stewardship responsibilities to external investment managers.
The investment stewardship process ensures that the organisation’s investments meet its goals. It is also a way to protect the organisation’s assets and to ensure that the investments are being managed in a way that is consistent with the organisation’s values.
Frequently Asked Questions
In finance, stewardship of assets refers to the responsibility of financial institutions and professional investors to manage the assets entrusted to them prudently and ethically. This includes ensuring that the assets are appropriate for the investor’s goals and risk tolerance and that they are being managed in a way that is consistent with the investor’s values and preferences.
There are a few key differences between stewardship and engagement in finance. Stewardship is focused on the company’s long-term health, while engagement is focused on short-term goals and objectives. Additionally, stewardship is typically passive, while engagement is active.
Stewardship is typically done by financial professionals, while non-financial professionals often do engagement. Also, stewardship is typically done for the benefit of shareholders, while engagement is often done for the benefit of stakeholders.
Some of the key stewardship activities in the investment include:
- Ensuring that companies disclose accurate and complete information to investors
- Monitoring and engaging with companies on behalf of investors
- Voting on behalf of investors at shareholder meetings
- Providing input on corporate governance and environmental, social, and governance (ESG) issues
- Working with companies to improve their disclosure and management of risk
All of these activities aim to ensure that investors’ assets are being used to meet their expectations and support sustainable long-term growth.
We know, stewardship is the term for a company’s obligation to comprehend and control any number of ways in which they influence the environment. A company may identify sustainable methods, enhance its standing with customers, and even make savings by indulging in stewardship.
Related Terms
- Floating Dividend Rate
- Real Return
- Non-Diversifiable Risk
- Liability-Driven Investment (LDI)
- Guaranteed Investment Contract (GIC)
- Flash Crash
- Cost Basis
- Deferred Annuity
- Cash-on-Cash Return
- Bubble
- Asset Play
- Accrued Market Discount
- Inflation Hedge
- Incremental Yield
- Holding Period Return
- Floating Dividend Rate
- Real Return
- Non-Diversifiable Risk
- Liability-Driven Investment (LDI)
- Guaranteed Investment Contract (GIC)
- Flash Crash
- Cost Basis
- Deferred Annuity
- Cash-on-Cash Return
- Bubble
- Asset Play
- Accrued Market Discount
- Inflation Hedge
- Incremental Yield
- Holding Period Return
- Hedge Effectiveness
- Fallen Angel
- EBITDA Margin
- Dollar Rolls
- Dividend Declaration Date
- Distribution Yield
- Derivative Security
- Fiduciary
- Current Yield
- Core Position
- Cash Dividend
- Broken Date
- Share Classes
- Valuation Point
- Breadth Thrust Indicator
- Book-Entry Security
- Bearish Engulfing
- Core inflation
- Approvеd Invеstmеnts
- Allotment
- Annual Earnings Growth
- Solvency
- Impersonators
- Reinvestment date
- Volatile Market
- Trustee
- Sum-of-the-Parts Valuation (SOTP)
- Proxy Voting
- Passive Income
- Diversifying Portfolio
- Open-ended scheme
- Capital Gains Distribution
- Investment Insights
- Discounted Cash Flow (DCF)
- Portfolio manager
- Net assets
- Nominal Return
- Systematic Investment Plan
- Issuer Risk
- Fundamental Analysis
- Account Equity
- Withdrawal
- Realised Profit/Loss
- Unrealised Profit/Loss
- Negotiable Certificates of Deposit
- High-Quality Securities
- Shareholder Yield
- Conversion Privilege
- Cash Reserve
- Factor Investing
- Open-Ended Investment Company
- Front-End Load
- Tracking Error
- Replication
- Real Yield
- DSPP
- Bought Deal
- Bulletin Board System
- Portfolio turnover rate
- Reinvestment privilege
- Initial purchase
- Subsequent Purchase
- Fund Manager
- Target Price
- Top Holdings
- Liquidation
- Direct market access
- Deficit interest
- EPS forecast
- Adjusted distributed income
- International securities exchanges
- Margin Requirement
- Pledged Asset
- Stochastic Oscillator
- Prepayment risk
- Homemade leverage
- Prime bank investments
- ESG
- Capitulation
- Shareholder service fees
- Insurable Interest
- Minority Interest
- Passive Investing
- Market cycle
- Progressive tax
- Correlation
- NFT
- Carbon credits
- Hyperinflation
- Hostile takeover
- Travel insurance
- Money market
- Dividend investing
- Digital Assets
- Coupon yield
- Counterparty
- Sharpe ratio
- Alpha and beta
- Investment advisory
- Wealth management
- Variable annuity
- Asset management
- Value of Land
- Investment Policy
- Investment Horizon
- Forward Contracts
- Equity Hedging
- Encumbrance
- Money Market Instruments
- Share Market
- Opening price
- Transfer of Shares
- Alternative investments
- Lumpsum
- Derivatives market
- Operating assets
- Hypothecation
- Accumulated dividend
- Assets under management
- Endowment
- Return on investment
- Investments
- Acceleration clause
- Heat maps
- Lock-in period
- Tranches
- Stock Keeping Unit
- Real Estate Investment Trusts
- Prospectus
- Turnover
- Tangible assets
- Preference Shares
- Open-ended investment company
- Ordinary Shares
- Leverage
- Standard deviation
- Independent financial adviser
- ESG investing
- Earnest Money
- Primary market
- Leveraged Loan
- Transferring assets
- Shares
- Fixed annuity
- Underlying asset
- Quick asset
- Portfolio
- Mutual fund
- Xenocurrency
- Bitcoin Mining
- Option contract
- Depreciation
- Inflation
- Cryptocurrency
- Options
- Fixed income
- Asset
- Reinvestment option
- Capital appreciation
- Style Box
- Top-down Investing
- Trail commission
- Unit holder
- Yield curve
- Rebalancing
- Vesting
- Private equity
- Bull Market
- Absolute Return
- Leaseback
- Impact investing
- Venture Capital
- Buy limit
- Asset stripper
- Volatility
- Investment objective
- Annuity
- Sustainable investing
- Face-amount certificate
- Lipper ratings
- Average accounting return
- Asset class
- Active management
- Breakpoint
- Expense ratio
- Bear market
- Hedging
- Equity options
- Dollar-Cost Averaging (DCA)
- Due Diligence
- Contrarian Investor
Most Popular Terms
Other Terms
- Flight to Quality
- Protective Put
- Perpetual Bond
- Option Adjusted Spread (OAS)
- Merger Arbitrage
- Income Bonds
- Equity Carve-Outs
- Cost of Equity
- Earning Surprise
- Capital Adequacy Ratio (CAR)
- Beta Risk
- Bear Spread
- Ladder Strategy
- Junk Status
- Intrinsic Value of Stock
- Interest-Only Bonds (IO)
- Interest Coverage Ratio
- Industry Groups
- Industrial Bonds
- Income Statement
- Historical Volatility (HV)
- Flat Yield Curve
- Exotic Options
- Execution Risk
- Exchange-Traded Notes
- Event-Driven Strategy
- Eurodollar Bonds
- Enhanced Index Fund
- Embedded Options
- Dynamic Asset Allocation
- Dual-Currency Bond
- Downside Capture Ratio
- Dividend Capture Strategy
- Depositary Receipts
- Delta Neutral
- Deferment Payment Option
- Dark Pools
- Death Cross
- Debt-to-Equity Ratio
- Fixed-to-floating rate bonds
- First Call Date
- Financial Futures
- Firm Order
- Credit Default Swap (CDS)
- Covered Straddle
- Contingent Capital
- Conduit Issuers
- Company Fundamentals
- Commodities Index
- Chart Patterns
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