WALNUT CREEK, CALIF., April 15, 2015 (GLOBE NEWSWIRE) -- Daniel S. Kern, CFA®, President and Chief Investment Officer for Advisor Partners, today announced publication of the firm's updated research on fossil fuel divestment. Their new research report, Fossil Fuel Divestment: Perspectives After the Oil Bust, is now available.
Advisor Partners originally undertook the study, in 2012, to address a growing divestiture movement, especially among universities and municipalities. Kern and co-researcher Gerard Cronin revisited the topic to update the analysis and review emerging issues, including the implications of the oil bust for proponents of divestment.
DEBATE OVER FOSSIL FUEL DIVESTMENT
The 2015 study extends the original framework for analyzing the investment implications of divestment, refining it to address the emerging consensus about what "fossil fuel divestment" means:
• Extending the historical framework through the end of 2014, the research simulates backward-looking returns to develop a hypothesis about how an index portfolio divested of fossil fuels would have performed over prior years.
• It also includes forward-looking estimates of risk to forecast whether such a portfolio would present risks materially different from an unconstrained portfolio.
• Portfolio composition is investigated to anticipate sources of risk-and- return differences. Finally, the study looks at the reinvestment issue of what to do with proceeds from divestment.
"We're fascinated by the debate over fossil fuel divestment, finding it an important topic in social terms but also challenging in intellectual terms," said Kern. "We've tried to leave our personal biases out of this study, to present as reasoned and objective an analysis as possible."
The research suggests that removing energy stocks from a well-diversified portfolio may have a small to moderate impact on investment risk; however, the magnitude of the impact is very much a function of the investor's time horizon. Endowments with a multi-decade time horizon are likely to be much better equipped to weather near-term volatility than an individual investor nearing retirement. The question of reinvestment is equally important, and risk and reward associated with divestment are intricately linked to the decision about how to reinvest. As with the original divestment question, time horizon plays a critical role influencing the success or failure of a given strategy.
ABOUT ADVISOR PARTNERS
Founded in 2001, Advisor Partners is an investment advisory firm providing a broad range of sophisticated investment solutions to a select group of independent advisors and financial institutions. Advisor Partners is a wholly owned subsidiary of Advisor Software (ASI), which acquired Advisor Partners in 2009. Daniel S. Kern, CFA®, joined the firm as President and Chief Investment Officer in 2011. Andrew Rudd, Ph.D., founder and former chairman and CEO of Barra, Inc., serves as chairman of Advisor Partners' investment committee. For more information, visit www.AdvisorPartners.com.
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