RETAIL REPORT: Aspirations Drive Millennial Investing


During the past five years, exchange-traded funds and mutual funds managed under a variety of ESG principles accounted for less than 1% of total net flows in to these vehicles. New research from Cerulli Associates, a global research and consulting firm, concludes that addressing investors’ interest in combining their aspirational goals with their investment portfolios offers asset managers the opportunity to garner incremental flows into ESG-focused products.

On a generational basis, interest in aligning investments with environmental and social objectives is highest among Millennials (54%) and declines consistently among each successively older generation. Scott Smith, director of advice relationships at Cerulli, explains, “This result underscores the importance of asset managers connecting with potential clients early in their investment lifecycle. Helping emerging investors define and implement their initial investment philosophy can positively affect long-term investor loyalty.”

The Millennial cohort surveyed also supports themes associated with positive societal benefits such as living wages, environmentally responsible practices, and diverse boards. Integrating such themes into the investment process will not happen easily or overnight. Asset managers will need to consider how to implement subjective screens across a widespread addressable market and determine how to evaluate incremental progress—requiring time and resources. To start, Smith recommends that asset managers develop a thorough understanding of which types of ESG screens are of most interest among various targeted investor cohorts and anticipate how these guidelines will evolve during the next decade. By doing so, they may address the twin goals of maximizing both investor outcomes and the change they are able to help effect.

Cerulli’s third quarter 2019 issue of The Cerulli Edge—U.S. Retail Investor Edition explores pockets of demand for aligning societal aspirations with investment portfolios.

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