Guest Lectures

Question 1

According to Jeroen Bos from NN Investment Partners, there are several ways of investing responsibly. Please mention and explain two of these.

Answer 1

1. Exclusions
2. Active Ownership
3. ESG Integration
4. Impact Investing
5. Exclusion in sustainable investing means deliberately avoiding investment in companies or industries that have a negative impact on the environment, society, or other ethical concerns, such as tobacco or fossil fuels;

for example, a sustainable investor might choose not to invest in a coal mining company due to its environmental impact.

2. Active ownership in sustainable investing means actively working with firms and directly engage with management to make them more environmentally and socially responsible.

Question 2

What do we mean by smart beta strategy? Also, explain how factor models are useful when assessing the performance of smart beta strategies or smart beta funds.

Answer 2

Smart beta strategies aim to achieve returns higher than the market by using relatively passive investment approaches.

These strategies don’t rely on individual stock picking but instead focus on tilting the portfolio in specific directions, such as value vs growth, small vs large companies, profitability, and volatility.

Factor models are used to check if smart beta strategies actually have a higher loading on the factor they are tilting towards.