Are these worries legitimate, and do you share them?
Bertsch: The focus needs to be on effective disclosure. I am confident the SEC is focused on it, but as the agency considers views of various stakeholders, there is a risk that disclosures could be damaged. So there needs to be good investor advocacy.
FA: Who is taking the lead on environmental, social and governance investing: retail investors or institutional investors? Do you see ESG as a major component of institutional fund managers’ decision-making and do you expect it to grow significantly?
Bertsch: Institutions have had the lead on ESG issues because of their scale, and that will continue to be the case. The major push is for integration of ESG into investment generally for institutions and individuals. We’re midstream on this trend. ESG is important and will continue to be more important.
FA: Do your members work with high-frequency traders, and do you see their dominance of daily stock exchange volume as an asset or a liability for institutional investors and, separately, mom and pop investors?
Bertsch: With institutional investors focusing on the long term, I see micro-second high-frequency trading largely as just noise on the market.
FA: What is the relationship of pension funds with activist investors, and do you see that relationship changing?
Bertsch: There has been more skepticism by institutional investors on activists, especially related to financial engineering. Some activists are pushing for change in strategy or management, but others are focused just on share buybacks. I think share buybacks are not seen as a cure-all by many of the institutions.
FA: What is the impact of proxy advisory firms on the bottom line of pension funds?
Bertsch: Proxy advisory firms play a useful role in helping institutions vote. But institutions need to take responsibility and not simply rely on the proxy services.