July 10, 2018
Due Diligence Alert: MODERATE
Competitive Alert: 3
Event: Raymond James offers proprietary ESG model portfolios.
Briefing Points: i) Raymond James is operationalizing its first range of ESG 3-party sub-advised model portfolios: ii) The model portfolio offerings are proprietary to Raymond James’ advisors and will be overseen by the firms in-house due-diligence team: iii) ESG managers will be selected based upon their “dedication to a sustainability mandate”, their incorporation of ESG factors in their financial analysis process, and the presence of “dedicated resources and personnel” to ESG-related issues.
Affected Funds: Raymond James Freedom Model Portfolios
Asset Classes: US Equities and Fixed Income
Management Company: Raymond James Asset Management Services (St. Petersburg, FL)
DD Concern: New untested mandate and/or management team
Marketing Considerations: The proprietary nature of the new portfolios may reinforce the company’s reps position in the marketplace – it will lessen the possibilities of reps turning to other providers. It is not expected to result in near-to-mid term inroads into other firms’ ties to their reps, particularly over the near-to-mid term.
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July 6, 2018
Due Diligence Alert: LOW
Competitive Alert: 4
Event: Smart Pension (UK) hires its first ESG investing head.
Briefing Points: i) Rachel Neill is the new head of ESG investing at Smart Pension, a UK-based on-line pension platform targeted to employees, employers and advisors: ii) Ms. Neill will be responsible for developing and directing all Smart Pension’s ESG related product initiatives – she was previously Smart Pension’s general product manager: iii) Ms. Neill’s hiring is in advance of the firm’s new offering of “responsible investment” trusts offerings.
Affected Fund(s): NA
Asset Classes: NA
Management Company: Barnett Waddingham (London, UK)
DD Concern: Consistency of investment analytics/research
Marketing Considerations: On its surface this initiative supports a growing global retirement plan responsiveness to younger, more ESG-conscious investors. It also points to the growing availability of and reliance on financial technology to serve the small-to-medium sized employer plan market, and its participants, i.e., “RoboAdvising,” not only in Europe but also in the U.S.
July 5, 2018
Due Diligence Alert: LOW
Competitive Alert: 3
Event: UBS focusing on integrating ESG into fixed income strategies.
Briefing Points: i) A UBS report stresses the importance of incorporating ESG factors into the fixed income credit analysis process: ii) UBS views that the integration of ESG factors in fixed income portfolios has been hindered by the lack of sustainable indices and issuer engagement and related corporate disclosure on their sustainable practices: iii) UBS is focusing on the “systematic integration” of ESG factors “across” their entire fixed income platform.
Affected Fund(s): All UBS fixed income mutual funds and SMAs
Asset Classes: All US and non-US Fixed Income
Management Company: UBS Asset Management
DD Concern: Change in risk profile
Marketing Considerations: The emphasis of ESG in fixed income and technical aspects of credit analysis is a progressive management stance that has been gaining traction. However, it is too early in their process to judge how well this translates into existing as well as any new products and results. Investors may desire to wait beyond the development phase before taking on potential new risks.
July 5, 2018
Due Diligence Alert: LOW
Competitive Alert: 3
Event: Morgan Stanley introduces new ESG SICAV.
Briefing Points: i) Morgan Stanley has opened a new Luxmbourg-based ESG portfolio managed by William Lock, their head of international equities: ii) The fund is designed to maintain a low carbon “impact” and is indexed to the MSCI World Index: iii) The fund’s investment management approach has a “standard” exclusionary screen, and it also focuses on addressing financial risks emenating from ESG factors.
Affected Fund(s): Morgan Stanley Global Sustainable Fund
Asset Classes: US and non-US Equities
Management Company: Morgan Stanley Investment Management, Inc.
DD Concern: Change in product-line
Marketing Considerations: The new product benefits from MS’s established management team and firm-wide commitment to sustainability investing. That said, it’s too soon to assess the benefits derived from implementing the fund’s ESG strategy which could also be transferred to the US retail market.
July 2, 2018
Due Diligence Alert: MODERATE
Competitive Alert: 4
Event: Federated Investors finalizes purchase of stake in UK sustainable investing leader.
Briefing Points: i) Federated acquired a 60% stake in Hermes Fund Management Ltd – a $47.2bn UK asset manager: ii) Federated plans to bring Hermes practice to the US mutual fund, SMA and “ESG-related consultancy services”: iii) Hermes, which maintains its staff in London, is known for its “high-conviction investment strategies,” sustainable investing leadership, and market presence in the UK, continental Europe and Asia.
Affected Fund(s): All Federated mutual funds and SMAs
Asset Classes: All
Management Company: Federated Investors (Pittsburgh, PA)
DD Concern: Merger/acquisition and business management changes
Marketing Considerations: The acquisition gives Federated Investors an established and proven sustainable investing capability and low-lead time platform for entering the sustainable investing marketplace in the U.S. It gives the firm more flexibility to expand upon, build new products and enter new markets both domestically and overseas.
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DEFINITIONS
Due Diligence (“DD”) Alert: Ranks each identified sustainable fund event or development according to a three-point “call to action” scale that ranges from Low to High, defined as follows:
LOW: A preliminary review and evaluation is recommended, but no on-going monitoring or manager meeting is needed.
MODERATE: Near-to-mid-term review and evaluation is recommended along with a manager meeting.
HIGH: Immediate manager contact and meeting are recommended, plus detailed review and evaluation – scheduled on-going more detailed monitoring and follow-up manager meeting(s) are advised.
Marketing Considerations: Ranks the level of required response/urgency for each identified sustainable fund’s product development, sales, promotional or other strategic marketing event or development. The ranking scale is 1 to 5, where a rank of 1 indicates the lowest level of urgency, requiring little or no competitive response, to a rank of 5 that indicates the highest level of urgency, requiring immediate competitive and/or marketing and sales force response.