Millennial managers

Abstract

Research Question/Issue: This paper investigates whether and how millennial mutual fund managers differ from managers born in other generations in terms of environmental, social, and governance (ESG) orientation in portfolio choices and voting decisions. Research Findings/Insights: We find that millennial mutual fund managers hold portfolios that are more ESG oriented than do managers from other generations, consistent with anecdotal evidence suggesting that millennials are more driven by purpose than profits. Our findings suggest that the observed relationship is stronger when managers have more discretion over portfolio choices, that is, in active funds and funds with lower flow-performance sensitivity. Furthermore, we find that millennial managers respond more strongly to social movements by reallocating assets into more socially conscious firms. We also find that millennial managers are more supportive of environmental proposals when their outcome is contested. Theoretical/Academic Implications: Our paper shows how cultural, political, and economic events, including social movements experienced by people of the same age cohort, shape preferences and beliefs and result in different investment strategies and voting among mutual fund managers. We also show how institutional constraints might limit managers' ability to impose their own preferences when investing or voting their shares. Practitioner/Policy Implications: Millennials are increasingly replacing older generations in managerial roles and investing in the stock market due to wealth transfers from their parents. This study offers insights to policymakers and investors interested in understanding the drivers of ESG investment.