Digital platforms, private markets, and ESGs — the future of investing is already here

  • The S&P was set to have its best year since 2013, led by mega-cap tech, and then came the coronavirus pandemic.
  • Even with the global market disruption, key trends remain strong —  the increased populartiy of digital-investing platforms,  focus on private markets, and burgeoning interest in ESGs.
  • Millennial and Gen Z day-traders were already a growing presence before the pandemic, and have widened the universe of investors considerably.
  • 100 People Transforming Business is an annual list and series highlighting people across industries who are changing the way the world does business. Check out the full list for 2020.

2020 started innocently enough on the investing front.

The S&P 500 was fresh off its best year since 2013, led by the usual suspects in mega-cap tech. Digital investing platforms swelled in popularity, private markets started attracting major attention, and ESG looked like the next big thing.

Then a global pandemic struck, upending the global economy and throwing every conceivable market dynamic out of whack.

Fortunately for those who went all-in on the trends outlined above, they're still very much driving forces of the future of investing. They may look slightly different in a post-coronavirus landscape — as does nearly everything — but the same underlying themes and motivations persist.

Transformations in retail investing

Perhaps the biggest transformation has taken place on the retail-investing front. While millennial and Gen Z day traders were already making their presence felt before the virus outbreak, the scope of their activity, and its ability to move stocks and markets, has widened considerably.

That plays right into the hands of Jaime Rogozinski. He's the founder of WallStreetBets, an irreverent online forum where traders swap strategies, tips, success stories, and dismal failures. Rogozinski said the subreddit has doubled since 2012, and its public profile has never been higher.

It's also reshaped the order of things for Anthony Denier, the CEO of WeBull. As its market-leading competitor Robinhood has drawn scrutiny for supposedly gamifying investing, his platform offers educational resources and targets a more advanced audience. His efforts are part of an ongoing battle among trading platforms as they all vie for the attention of the next generation.

"We will go after the Robinhood demographic," Denier said. "We will go after the robo-adviser demographic. And we also want to go after the advanced trader demographic."

Private markets and ETFs

When it comes to maximizing returns, investors were increasingly looking to the private market ahead of the pandemic. The shift was in response to diminishing yields in other asset classes. And while stocks have certainly surged from multiyear lows reached in late March, the private market remains hot.

Fran Kinniry is helping to spearhead that, as head of portfolio construction for the Vanguard Investment Strategy Group. His goal is to not only encourage private-market participation but to make it available to everyday investors.

 "We see a very strong investment case," he said. "However, that investment case, being very strong, has been limited to the top wealth pools."

On the subject of ETFs — which have been among the world's fastest-growing products for years — the space is crowded with a wide range of offerings. So providers are having to get creative.

That outside-the-box thinking is exemplified by Precidian Investments, which is planning to launch an ETF that's traded actively like a mutual fund, but doesn't require daily disclosures. It's already won some business on Wall Street, with Goldman Sachs, BlackRock, JPMorgan, and Fidelity having entered into agreements.

Social responsibility investing 

And then there's environmentally conscious and sustainable investing, which started the year looking like the next big thing in markets. While the virus outbreak has drawn some attention away, it's still a thriving area into which resources are being poured.

But while billions of dollars flow into environmental, social and corporate governance (ESG) funds and strategies, an important question remains. What qualifies a company as ESG-compliant?

That's where Janine Guillot, the CEO of Sustainability Accounting Standards Board (SASB), comes in. She essentially acts as a gatekeeper for the venerable ESG identifier, leaning on a set of evidence-based, market-informed, and proprietary standards.

"We really think that SASB is a tool for making better capital-allocation decisions by understanding the connection between sustainability and financial performance," she said. "I think this is a structural shift in how investors look at companies."

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