The investment management industry must address the high fees it charges in relation to the realistic returns it can achieve in the current environment, attendees at the CFA Institute’s annual conference were told this week.

As part of celebrations of the 50-year history of the CFA Charter, a panel of eminent institute members discussed the future of the investing profession against a backdrop of recent scandals on Wall Street and the resulting lack of trust in investment managers after the financial crisis.

Participants included Abby Joseph Cohen, president of the Global Markets Institute and senior investment strategist at Goldman Sachs, who highlighted the globalisation of the industry as one of its greatest challenges and opportunities.

Cohen was part of a panel that included Morgan Stanley Smith Barney managing director and chief investment strategist, David Darst, and 29-year veteran of Greenwich Associates, Charles Ellis.

In a nod to some of the much-publicised failings of the investment-management industry, Cohen says the industry “sometimes forgot” to act as a responsible intermediary in the allocation of capital.

“We sometimes forgot that our role is to serve as an intermediary between those entities on this planet who are saving and those entities that need capital to grow further,” she told delegates.

The behaviour of Goldman Sachs and other Wall Street banks in the lead up to the financial crisis has attracted widespread criticism.

Cohen also noted that the spread of economic growth across the globe was increasing opportunities for the industry and also the demand for financial services.

“There will be a high level of financial services needed. The globalisation of this industry means we now need to operate in so many different locations, and we need to think about the right regulatory and professional structures,” she says.

 

Beware greed and fear

Ellis was another on the panel who called for the industry to reflect on its relationship to its clients, predicting that exponential growth in fees would lead to a stark reality check for the investment profession.

“Average fees for institutional investors have risen and risen, and are up from around 10 basis points to up over more than 100 basis points,” Ellis told delegates.

“There are a lot of different variables involved but this is an aggregation and it is much the same for individuals. While fees have increased, much to our enjoyment and satisfaction, the incremental returns over and above an index fund have come down, and they may have already passed [fees]. While I think they passed several years ago, if they haven’t, they will pass and there is very little preparation for this difficult reality.”

Ellis called for the managers to look for growth opportunities in the counselling component of investment advice. He says managers must better understand the psychology and behavioural nuances of their clients and specifically tailor investment strategies within this framework.

Darst was also taking a global outlook for the industry, describing the current challenges facing it as part of a period of “catharsis, cleansing and purging” from two decades of bullish markets.

He says investment professionals have to be concerned about the psychology of investing and human behaviour.

“As investors, we need to be aware of the fears that are deep in the viscera of our clients around the world,” Darst says.

After the financial crisis, Darst thinks clients are more worried about systemic risk and preserving capital than they are about asset allocation.

“Greed and fear – that is what makes or breaks fortunes – excessive greed and excessive fear and getting caught up in it,” he says.

A founding president of Morgan Stanley Investment Group, Darst believes the industry is in a period of epic change that involves both a baton pass to another generation of professionals and being rapidly re-shaped to meet the growing opportunities from an emerging middle class in developing countries.

 

 

Curry and Kama Sutra

He points to projected population growth in countries in Southeast and Southern Asia. Populations in this region, which includes Bangladesh, India, Indonesia, Malaysia, the Philippines and Vietnam, are projected to collectively grow by 1.3 billion in the next 40 years.

“It took 6000 years of eating chicken and rice to make 1.3 billion Chinese and in another 40 years of eating spicy curry and advancing the Kama Sutra techniques these countries are going to create another China,” Darst says.

Cohen and Darst told delegates that despite the financial crisis, the fundamentals of investing and the importance of valuation in making investment decisions had not changed.

The industry learnt the hard lesson of managing liquidity risk as a result of the financial crisis, Cohen says, but the foundations of investment theory remain intact.

“Has the theory kept up with what is going on? I would argue it has because most of the basic tenets of measuring valuation and risk properly are unchanged,” Cohen says. “But practitioners, all of us in this room, have the responsibility of updating the manner in which we do that measurement.”

Darst says clients want managers to have a clearly defined investment philosophy and points to his own key tenets of investing as:

1)      Asset protection is paramount

2)      Correlations are critical

3)      Reversion to the mean

4)      Assets are driven by fundamentals, valuation and psychology

“Don’t sell me a scenario, sell me a price. At the right price Greek bonds are safe,” he tells delegates. “At the wrong price, US Treasuries are one of the most risky investments known to humankind.”

US companies are failing to meet a 10-year roadmap to sustainability and some sectors globally are ‘inherently unsustainable’ requiring a drastic refocus, according to two separate reports released this week by leading sustainability research firms Ceres and EIRIS.

A report on the progress that some of the world’s biggest companies are making towards achieving sustainability by 2020 has shown many US companies are failing to embrace sustainability at a pace necessary to meet the 10-year road map.

The 21st Century Corporation: The Ceres Roadmap to Sustainability measures how companies are responding to environmental and social challenges such as climate change, water scarcity and supply-chain conditions.

Researchers found that some of the 600 companies assessed were showing leadership but overall there was significant need for improvement.

The report, conducted in conjunction with Sustainalytics, was launched at the Ceres annual conference in Boston last week.

President of Ceres, Mindy Lubber, and chief executive of Sustainalytics, Michael Jantzi, say companies are missing a big opportunity by not fully embracing sustainability.

“We see it as a world of opportunity for companies to improve competitiveness, realise large savings through energy efficiency, invest in their workers, strengthen their supply chains and, in many sectors, reap the benefits of the enormous investment opportunities in clean technology and clean energy,” they write in the report.

According to a press release, Anne Stausboll, chief executive of CalPERS, echoes the sentiment, saying: “The future will belong to innovative companies that understand that building long-term shareholder value and being an industry leader requires the integration of sustainability principles at every level, from the C-suite to operations and throughout supply chains.”

Ceres directs the Investor Network on Climate Risk (INCR), which includes more than 100 institutional investors with about $10 trillion in assets.

Andrea Moffat, vice president of corporate programs at Ceres, says there is an opportunity for institutional investors to proactively ask companies about their environmental, social and corporate governance (ESG) risks and opportunities.

“Companies respond when their owners ask questions but they are not hearing from enough investors. The Roadmap to Sustainability analysis indicates that investors have a significant opportunity to engage directly with companies on their sustainability disclosure in financial filings, annual meetings, investor road shows as well as ensuring that boards of directors have clear oversight,” Moffat says.

“If environmental and social performance was raised as part of every investor engagement with business, we would expect to see a much larger number of companies developing sustainable business strategies that account for their full range of risks and opportunities.”

Similarly, the EIRIS Sustainability Report looks at the sustainability performance of the 2063 companies in the FTSE All World Developed Index and applies its newly launched EIRIS’ global sustainability ratings to measure the extent to which those companies are tackling sustainability challenges.

The analysis reveals some significant differences in the extent to which companies are on track to tackle these.

“Investors need to be aware of these differences and also the initiatives, drivers and strategies which are likely to be the most effective in engendering improvements in corporate sustainability performance,” the report states.

For example, ExxonMobil, the world’s largest oil and gas company by market cap, only ranks 41 out of 84 companies in that sector and so does not show the same level of leadership as some of its smaller peers.

Similarly, Apple, ‘one of the world’s largest companies and a financial superpower’ scores D in EIRIS’ analysis, which places it among the worst performers of the technology hardware and equipment sector.

EIRIS works with more than 100 asset owners and asset managers globally to create customised ESG ratings, engaging with companies and creating specific funds for their clients.

 

 

Facts and figures

In the Ceres report’s four-tier assessment system, just a quarter of all companies surveyed were in the top two tiers for progress on governance, while 24 per cent achieved some degree of meaningful stakeholder engagement.

On corporate-performance metrics, only 13 per cent of the companies evaluated on human rights policies and programs were ranked in the top two tiers. And just a third of the 600 companies had time-bound targets for reducing greenhouse gas emissions in direct operations.

However, there were some companies that stood out for their leadership.

Alcoa, Xcel and Intel were noted for sustainable corporate governance practices; Baxter and Ford were setting a high standard in stakeholder engagement; and Exelon, Nike and the Coca-Cola Company were ahead of the pack in performance on metrics for reducing environmental impact and improving workers conditions.

Intel is cited specifically for linking executive and employee compensation to company environmental goals such as reducing energy use and greenhouse gas (GHG) emissions; in the two years since it started the program, the company has cut energy use by 8 per cent and GHGs by 23 per cent.

Coca-Cola is credited for being on track to meet its ambitious performance goal of improving water efficiency by 20 per cent by the end of this year (against a 2004 baseline).

Other cutting-edge performance examples: Nike’s new partnership to implement a water-free fabric dyeing process, Kohl’s Department Stores achievement of net-zero greenhouse gas emissions at its stores, Pinnacle West using recycled urban wastewater (about 20 billion gallons a year) to cool its Palo Verde nuclear power plant and EMC building a new energy-efficient “virtual data center” to move data from physical storage to an entirely virtualized IT infrastructure (the shift has already saved the company more than $23 million).

 

The top 10 global sustainability leaders

EIRIS has applied its sustainability-ratings research methodology to measure the sustainability performance of 2063 companies from the FTSE AWD Index.

It identifies the top 10 leaders and their business categories as:

Puma, personal goods, Germany

FirstGroup, travel and leisure, UK

National Australia Bank, banks, Australia

GlaxoSmithKline, pharmaceuticals, UK

Roche, pharmaceuticals, Switzerland

Novartis, pharmaceuticals, Switzerland

Phillips Electronics, leisure goods, Netherlands

Deutsche Boerse, financial services, Germany

Novo Nordisk, pharmaceuticals, Denmark

The GoAhead Group, travel and leisure, UK

 

Amid calls from global leaders for pension funds to invest more in the green economy, institutional green investments still languish at less than 1 per cent of portfolios.

A recent OECD report looks at some of the barriers facing investors wanting to invest more in the sector, with regulatory uncertainty and a lack of suitable financial products key hurdles.

Sharan Burrow, the head of International Trade Union Confederation (ITUC), is one of those calling for more investment from pension funds.

Burrow says that green investment will lead to green jobs and the ongoing viability of pension funds themselves.

The ITUC recently released research claiming that 48 million jobs could be directly created if green investment was lifted to 2 per cent of GDP in 12 countries over the next five years.

It is “sound business management” to consider how investments would impact jobs and, therefore, future inflows into the pension industry, Burrow says.

“If you see diminishing jobs in your own industry and backyard, which means less money is flowing into your industry, then that has got to be a consideration of risk that would feed into any notion of fiduciary responsibility,” she says.

“It would, therefore, stand up that funds must be conscious of where their own investments may drive a more secure environment for the industry itself.”

The ITUC has identified a tipping point of a 5-per-cent allocation of portfolios to green investments, which it believes would provide enough critical mass to ensure confidence in green investments.

Burrow says the ITUC is pushing to reach this 5 per cent allocation target by 2020.

 

OECD lowdown

The OECD report handed down in late 2011 reveals that the industry is a long way from this goal.

The Role of Pension Funds in Financing Green Growth Initiatives by Raffaele Della Croce, Christopher Kaminker and Fiona Stewart, reports that pension funds represent $28 trillion in combined capital. But despite the recent growth in socially responsible investing, green investments represent less than 1 per cent of portfolios globally.

The authors find a lack of regulatory certainty, with unsupportive government policies and ongoing subsidies of fossil fuel-intensive industries make most green investments uncompetitive.

“Pension funds and other institutional investors will not make an investment just because it is green – it also has to deliver financially,” the paper finds.

Estimates of how much money would be required to mitigate the effects of climate change vary wildly. The World Economic Forum has estimated that the clean-energy investment necessary to restrict global warming to less than 2°C would be $500 billion per year by 2020.

Another barrier to investment is the lack of financial instruments that would enable long-term-focused institutional investors to make these types of investments.

The market for green investments remains small and illiquid, with investment opportunities concentrated around small start-ups and higher risk venture capital-type opportunities, the report finds.

Researchers find governments could play a role in this regard by ensuring an adequate flow of investment-grade deals at appropriate scale are available.

Public finance could also be invested alongside private capital and there are a range of partial guarantees or subordinated equity and debt arrangements that could make green investing more attractive.

The report identifies green bonds as a particularly effective way of tapping institutional capital, while meeting funds’ investment requirements.

The market size of green bonds is approximately $15.6 billion with these fixed-income securities typically issued as AAA-rated securities by the World Bank, development banks and other entities focused on raising capital for green investing.

The current market in green bonds represents 0.017 per cent of the capital held in bond markets.

“There is clearly scope for scaled-up issuances of green bonds (at least in the tens of billions per year) but if this capital is to be raised through a thriving and liquid green-bond market, transparent politics based on long-term comprehensive and ambitious political commitment is needed,” the report states.

 

How to go green

However, some of the problems around investing in green infrastructure are not particular to this sector of the economy and are shared by the broader asset class.

Researchers make the point that problems around high fees, a lack of transparency and additional social, political and regulatory risks associated with infrastructure investments also hold back further investment in green infrastructure.

Governments can play a role in this by encouraging infrastructure investment through a range of regulatory and investment incentives.

The report notes that there is potential for countries to leapfrog the development of others through attracting capital to allow them to nimbly make the transition to a green future without the constraint of being tied to old fossil fuel-hungry infrastructure.

The focus on ESG and socially responsible investment and the growing push from asset managers to meet this demand is also muddying the waters of what is a green investment.

The OECD has started working on defining and measuring foreign direct investment as a way of offering support to governments in evaluating the effectiveness of policy.

The researchers say this has the potential to assist pension funds to arrive at a common understanding of what a green investment is.

A potential solution to this problem could involve a recognised ratings agency that could provide analysis of green bonds or funds to ensure that monies are used for green investments.

A backdrop to push for more green investments is the question of the role of pension funds and what their fiduciary duty is when it comes to ESG investments.

Burrow is unequivocal when it comes to what trustees’ fiduciary responsibilities are.

“The world has no choice to change. There are simply no jobs on a dead planet and that means no industry and investment is irrelevant,” she says.

“We need to look at the risk element of fiduciary responsibility, which is a traditional notion, and one that hasn’t played out if you look at the financial crisis and the lack of fiduciary responsibility around the question of analysis of risk that drove us to the brink based on simply accepting somebody else’s word on what products were secure. So, from our point of view fiduciary responsibility, particularly for workers’ capital, has to include risk. If it doesn’t, then fiduciaries are not doing their jobs. The second thing fiduciary responsibility is set up to do is to deliver a return on capital.

 

Fiduciary duty and green jobs

Expanding fiduciary duty to take in consideration of ESG issues and the broader impact of investments is a hotly debated topic in investment circles.

At a UN-backed investor summit in January, CalPERS chief executive Ann Stausboll called for funds to look beyond just returns to members and push for broader environmental and social action on such issues as climate change.

Other investors, such as Swedish buffer fund AP7, go as far as saying that returns are a secondary consideration to ensuring that investments meet the ethical values of members.

Opponents of this broadening of fiduciary duty beyond the aim of maximising financial returns for members within acceptable risk parameters point to the difficulty in making assumptions around what the values and ethical standards of members are.

Funds may also be taking on an unseen opportunity cost through allocating capital to green investments when other types of investments may generate better returns to members.

Like the OECD, Burrow sees a much bigger role for government in providing a catalyst for investment, saying they must drive a new “new global stewardship” of the world economy.

“We believe that the combination of patient capital and regulatory certainty, where government has to play a role, will mean that these investments will indeed be secure, but also profitable, and contribute to a future where our world is much more sustainable,” Burrow says.

“The issue is what the role for government is, and governments must find a new stewardship of the global economy. We are not suggesting that all of this money should come from government. Obviously, it must come from investors and a mix of private and public capital, depending on the context.”

The ITUC-commissioned research Growing Green and Decent Jobs , which identifies the potential impact of green investing on job creation, was conducted by the Millennium Institute.

The researchers attempted to construct a “green job creation benchmark” for particular industries that could act as a guide for the effectiveness of green investment.

The analysis looked at low, middle and high-income economies, with the institute analysing green-investment scenarios in seven industries.

These included energy, construction, transport, manufacturing, agriculture, forestry and water. The number of jobs created was measured through what researchers describe as quantitative simulations that looked at direct job creation.

A simulation of green investments for a particular country involved a 2 per cent of GDP investment in four key industries over a one-to-five-year time frame.

Industries selected vary via country and the research did not take into account potential job losses resulting from a reallocation of capital on this scale.

 

The €109-billion PGGM has been one of the global leaders in allocating assets according to ESG criteria. Now it is taking the philosophy one step further and aims to measure how all of its investments have a positive influence on the state of the world by measuring “sustainable returns”.

The Dutch pension-fund service provider claims it is developing a methodology to measure what it calls “sustainable returns” – the non-financial, societal and environmental benefits derived from its investments.

PGGM will then report to institutional clients how its investment portfolios positively affect the broader society and the environment generally.

Marcel Jeucken, managing director of responsible investment at PGGM, says the fund has been working with Erasmus University in Rotterdam to develop a method to measure the sustainable returns generated through targeted-ESG investments totalling €4.73 billion in 2011.

The measurement of these returns looks to capture both the return on current investments and the expected return on an annual basis of long-term investments.

“This can be done for our focused ESG investments, and this year we are also trying to think through whether we can use this idea to capture societal returns for all the assets we manage,” Jeucken says.

“This is very complicated and will start with some pilot projects, but we think it is increasingly necessary to be able to communicate to our wider stakeholders and especially the beneficiaries of the pension funds we work for.”

 

Measure for measure

The methodology for targeted-ESG investments aims to measure the impact across eight key areas: employment, local development, capacity building, empowerment, health and safety, material use, ecosystems, and waste and emissions.

The expected impact of each environmentally focused fund is reflected in a score on a scale of -3 for highly negative to +3 for highly positive. Reporting also discloses the social impact of every investment over €1 million in a specific fund.

Its first pilot project to try and measure the sustainability returns in its broader portfolio of investments will be in real estate. This year it has one other pilots planned but PGGM has not decided which asset class this measurement program will be expanded to.

PGGM is a founding partner of the Global Real Estate Sustainability Benchmark (GRESB) database, which records the sustainability of a number of real-estate funds around the world.

The benchmarking system will form a valuable basis from which to measure its sustainable returns generated through real-estate investments.

Jeucken says that government bonds and derivative-type investments will be areas where measurement of sustainable returns will prove challenging.

“This will be a project over multiple years and will be very complicated, but we are also hoping to develop this with others, going forward,” he says.

“We could collaborate or we could go to the market with our thoughts and ask for feedback and wider consultation within the principles for responsible investment, for example. This is a journey and it will take some time to do this.”

The fund will also extend ESG considerations to its broader asset-allocation decision-making processes, Jeucken says.

Previously, asset allocation had been limited to issues around climate change. Work on this included participation in Mercer’s Climate Change Report.

This year PGGM plans to expand the ESG factors it considers when setting its strategic asset allocation.

“Which assets are more prone to ESG risks or opportunities than others and what does it mean for your asset allocation? This isn’t about implementing within your portfolio from a portfolio-management perspective, but more talking about the role of asset owners in terms of how they allocate assets within their strategic benchmark,” he says.

PGGM started a project last year and is applying what it has developed with a view report its progress more fully by the end of this year.

“We will look at expected risk and return and also expected risk and opportunities in ESG factors in the context of achieving our objectives in asset allocation, which is not just high returns but higher and stable returns,” he says.

“Now, we are adding responsible returns to these key asset-allocation objectives and that is quite interesting for us and why we are looking at ESG in terms of asset allocation.”

The environment-focused investment funds include three infrastructure funds. and one offshore wind-power park. In private equity, PGGM works through a fund-of-fund mandate with AlpInvest, which invests in companies developing innovative and proven clean technologies.

PGGM also supports alternative energy through structured credit that finances a range of initiatives including solar and wind projects.

In real assets PGGM invests in carbon credits and sustainable-forestry funds.

 

 

 

Monday 21 May
9:00 – 11:30 am
The Codrington Room, Corinthia Hotel London
Whitehall Place, London SW1A 2BD
United Kingdom 

 

Over the next several years, it is estimated that European banks need to dispose of approximately €2.5 trillion of non-core assets. The €800 billion “firewall” against sovereign debt default in Europe and long-term refinancing operations (LTRO) have eased liquidity stress among the region’s banks, but has not dealt with their solvency issues.

Like US banks, European lenders bought plenty of lower quality, higher yielding debt between 2003 and 2008 to support leveraged buy-outs, real estate deals and structured financial products. They are now under significant pressure to sell these, and other, assets as a result of upcoming Basel III regulation, the need to reduce reliance on wholesale funding and requirements from the EU and local governments. For the first time, Europe is experiencing a distressed debt cycle of vast proportions.

This presents a compelling opportunity for investors. However some widely believed myths are preventing private capital from investing in European corporate distressed debt.

Banks are unwilling to sell assets at distressed prices due to weak balance sheets

The truth is that a number of European banks are selling distressed assets, but this is not necessarily visible because divestitures are generally less public for a number of reasons. The roundtable will discuss the reality behind this myth, what skills and experience are required to access these sales processes and the size of the actionable distressed debt opportunity.

European insolvency laws make it next to impossible to achieve debt-for-equity swaps

European insolvency laws are varied and complex. Knowledgeable investors carefully select the jurisdictions they work in and know what can and cannot be achieved. The roundtable will compare and contrast legislation in different countries to highlight the most attractive areas and how laws in more difficult countries are evolving.

Unions, laws and culture prevent effective operational restructurings of European companies

Restructurings in Europe are fundamentally different than in the US. European labour laws, unions and culture are important and powerful considerations. We will discuss how it is possible to work constructively with local officials and unions to develop realistic plans which can ensure a company’s long-term viability and maximize employees’ welfare over time while agreeing to appropriate short-term sacrifices.

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Water and how a company manages its exposure to this increasingly scarce resource is a key focus for Norway’s sovereign wealth fund in assessing the environmental and social performance of the more than 8000 companies in its portfolio.

Anne Kvam, the head of Norges Bank Investment Management’s (NBIM) corporate governance team, says the sheer size and scale of understanding the plethora of environmental, social and corporate governance (ESG) risks in its investments demands a focus on a selection of companies and a few key risks. Norges Bank is Norway’s central bank and NBIM manages the Norwegian Government Pension Fund Global on behalf of the ministry of finance.

“If we are to work actively on all 8000 holdings on all environmental, social and corporate governance topics, this would, of course, be impossible,” Kvam says.

“This is why the executive board decided we will have six focus areas and three of those are tied into environmental and social areas, and they are children’s rights, water and climate change. This doesn’t mean that we don’t see that there are many other risks out there that we hope and expect companies to manage.”

NBIM, the asset management arm of Norway’s central bank, is responsible for managing the investments of the $576-billion sovereign wealth fund.

Kvam explains that its investment staff can access an easy-to-handle, one-page report on a company that includes a scorecard of its performance across these three key areas.

The report draws on internally generated information and external research that the asset manager purchases.

Data on these three focus areas is gathered on more than 2000 companies. Broader ESG reporting for the fund covers 4000 companies, representing 80 per cent of the fund’s holdings.

 

Distilling best practice

NBIM has had water as one of these key focus areas since 2009. This includes issuing guidelines for companies it invests in on how they should report and manage water risk.

Under these guidelines, companies are expected to have a water-management strategy that evaluates the extent of water use in the production process and, more broadly, in a company’s supply chain.

Companies are also required to report on how its water use affects surrounding communities and how water risk management is built into corporate-governance processes.

NBIM reports that it is invested in several sectors with high water consumption. It has determined seven sectors particularly exposed to water-related risk: agriculture, food, manufacturing and power, mining, pharmaceuticals, pulp and paper, and water supply.

The fund has identified 1100 companies where water is an important input and output factor and these companies have a combined market value of $46.1 billion.

Kvam says that NBIM has narrowed its analysis of water risk at the companies it invests in to 447 companies selected from these high-risk industries.

These companies represent the largest holdings for the fund across these chosen sectors.

It reports annually on these companies in its Sector Compliance Report, which aims to encourage better reporting practices across industries, as well as identify top performing companies for disclosure and management of water risk.

The report notes that: “despite a notable increase, companies’ reporting on relevant metrics that track their exposure to water-related risks and the performance of their water management systems was still too low.”

The forestry and paper sector had the highest level of disclosure whereas companies in the mining and industrial sector had the lowest.

“We are dependent on companies disclosing good relevant information so we can make good investment decisions and good calls,” Kvam says.

Nestlé, Anglo American, Anheuser-Busch InBev and Danone were among 14 companies with the highest marks for reporting on water-related risks in 2011.

GlaxoSmithKline, Kellogg, Kirin Holdings, Merck & Co, Molson Coors Brewing, PepsiCo, Pfizer, PG&E, SABMiller and Sanofi were also top performers.

Of the 447 companies assessed in this area, 32 per cent scored zero.

“It is common to name the worst performers as a kind of naming-and-shaming part of ESG, but we are trying the other route by naming what we think are the best performers and who are the best at disclosure,” she says.