Materiality Matters: Employee Turnover in Information Technology

The escalating competition for specialized talent, particularly in AI development, is significantly increasing employee turnover within the information technology sector.

This trend, often overlooked by investors, has a material impact on company performance. Our analysis reveals a consistent inverse relationship between employee turnover rates and stock returns, with companies experiencing lower turnover historically outperforming their high-turnover peers.

Understanding and integrating such "social" ESG factors is crucial for effective portfolio construction, allowing advisors and investors to identify hidden risks and opportunities. By focusing on factors like employee retention, we can better navigate the evolving landscape and align investments with sustainable growth potential.