August 13, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 2
Event: BlackRock sustainable funds continue to maintain positions in Turkey in face of crisis.
Briefing Points: i) Blackrock’s sustainable investment funds continue to hold debt positions in Turkey as sovereign concerns rise, ii) Giulla Pellegrini, who heads BlackRock’s EMD sustainable investments stated that they have, however, lessened their exposure in light of recent events, and iii) Mr. Pellegrini notes that “policy unpredictability” with a new government and potentially less central bank “independence” are factors affecting the outlook for Turkey.
Affected Fund(s): BGF EM Bond Funds
Asset Classes: Non-US and Emerging Bond Funds
Management Company: BlackRock, Inc. (New York, NY)
DD Concern: Change in risk profile
Marketing Considerations: Addressing the financial crisis in Turkey will serve as a solid test of the manager’s analytical and management capabilities in the “hot” EM market. Of course, if the fund takes a hit, it will erase any “bragging” rights.
[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”reg” ihc_mb_template=”4″ ]
August 8, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 2
Event: ESG bond funds are added to RBC’s recommended list.
Briefing Points: i) RBC Wealth Management has designated 3 ESG funds to its platform’s “high-conviction” list, ii) The funds are the first ESG fixed-income choices added to RBC’s preferred list, and iii) RBC Wealth Management’s platform is available to financial advisors, planners, and other intermediaries.
Affected Fund(s): Pimco Total Return ESG Fund, Pimco Low Duration ESG Fund and Access Capital Community Investment Fund
Asset Classes: US and Non-US Fixed Income
Management Company: RBC Wealth Management (New York, NY)
DD Concern: Cash flow and liquidity management
Marketing Considerations: The high-conviction rating for the ESG bond funds on the platform’s recommendation list will grab attention and likely bring in new assets. Possibly as important, it may attract new reps to RBC’s platform. It also sends notice that the platform and its ratings are in-tune with broader market trends toward sustainable investing and that the firm is positioning itself to meet them.
August 7, 2018
DUE DILIGENCE Alert: LOW
COMPETITIVE Alert: 4
Event: Robeco publishes guidebook on sustainable investing.
Briefing Points: i) Robeco has published “The Big Book of SI” as a primer to educate and help institutional and retail investors and financial advisors “navigate” the “world” of sustainable investing, ii) The book covers a range of issues, including: how to make ESG factors part of an investment process, and the relationship between investment performance and ESG factors, and iii) The book focuses on what are believed to be the 3 main aspects of sustainable investing in the future; “changing climate, rising inequality and cybersecurity”.
Affected Fund(s): N/A
Asset Classes: N/A
Management Company: Rebeco Investment Management (New York, NY)
DD Concern: Investor outreach and education
Marketing Considerations: Robeco and Robeco SAM, founded in 1995, have a long history in sustainable investing. Publishing the book enhances the firm’s reputation and credibility as a worldwide leader in sustainable investing.
August 6, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 4
Event: New ESG emerging debt funds are opened by BlackRock.
Briefing Points: i) BlackRock has introduced 4 new open-end ESG emerging market (“EM”) UCITS funds, ii) The funds invest in emerging market corporate and government bonds, local currency and related EM fixed-income instruments, and iii) The funds are benchmarked to the JP Morgan’s JESG EMD indices, and are rebalanced monthly.
Affected Fund(s): BGF EM Bond Fund, BGF EM Local Currency Bond Fund, BGF EM Corporate Bond Fund and BGF EM Blended Bond Fund
Asset Classes: Non-US and Emerging Fixed Income
Management Company: BlackRock, Inc. (New York, NY)
DD Concern: New untested mandate and/or management team
Marketing Considerations: The funds are seemingly targeted to non-US institutional and HNW investors. They are believed to be designed for more sophisticated portfolio construction objectives. The funds can be expected to be offered to US advisors and selected US investor groups in the mid-to-long term, but are not likely to be geared individually to the broad US retail market.
August 1, 2018
DUE DILIGENCE Alert: LOW
COMPETITIVE Alert: 2
Event: Head of UBS Asset Management has a new “positive” view on ESG investing.
Briefing Points: i) Suni Harford, the Head of UBS’s asset management group, now views ESG investing in a more “positive light” as investor emphasis on the “morally responsible way” of investing grows, ii) Ms. Harford’s view is also influenced by the added availability of equity and fixed income data which allows for more thorough analysis and investment decision making related to ESG factors, and iii) Ms. Harford moved to UBS AM last year after 24 years with CitiBank and their global fixed income strategies group.
Affected Fund(s): All UBS Mutual funds and SMAs
Asset Classes: US and Non-US Equities, Fixed Income, and Alternatives
Management Company: UBS Asset Management (America) (New York, NY)
DD Concern: Portfolio management consistency
Marketing Considerations: This can be considered to be a clear message that cultural, product development and portfolio management changes are to be expected. On the other hand, one must ask “what took her so long”?
August 1, 2018
DUE DILIGENCE Alert: HIGH
COMPETITIVE Alert: 5
Event: Fidelity lowers expense ratios on three Fidelity Sustainability Index Funds and plans to consolidate share classes.
Briefing Points: i) Fidelity announced the lowering fees covering its Fidelity U.S. Sustainability Index Fund, Fidelity International Sustainability Index Fund and Fidelity Sustainability Bond Index Fund, including all applicable share classes. Regardless of share class, expense ratios were dropped to 11 basis points, 20 basis points and 10 basis points, respectively, from as high as 30 basis points, ii) In the process, Fidelity is also simplifying expenses by offering the single lowest-cost share class to all investors regardless of size, and iii) the consolidation of share classes is intended to take place in early November and shareholders will be notified in the coming months.
Affected Fund(s): Fidelity U.S. Sustainability Index Fund, Fidelity International Sustainability Equity Index Fund and Fidelity Sustainability Bond Index Fund.
Asset Classes: US Bonds, US Equities and International Equities
Management Company: Fidelity Investments (Boston, MA)
DD Concern: Competitive strategic move/repositioning
Marketing Considerations: Lower expense ratios will reduce tracking error and make these funds more attractive on an absolute and relative basis. In the process, the funds could potentially attract more assets so as to achieve scale from current levels ranging from $25.8 million to $55.1 million.
July 31, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 3
Event: Impax selected to manage UK ethical fund.
Briefing Points: I) Impax has been selected to manage St. James Place Ethical Funds, replacing previous manager, Standard Life Aberdeen, ii) The account’s new portfolio managers are Kirsteen Morrison and David Winborne, and iii) Under its new management, the fund which has been renamed the St. James Place Sustainable and Responsible Ethical Fund, will increase its focus on ESG integration to enhance its traditional ethical screens.
Affected Fund(s): St. James Place Sustainable and Responsible Ethical Fund
Asset Classes: US and Non-US Equities, Alternatives and Private Equities
Management Company: Impax Asset Management (London, UK)
DD Concern: Cash flow/liquidity management
Marketing Considerations: The new mandate provides a notable sales “story” for reaching out to potential non-US clients as well as US institutional market. The expansion to a global market suggests a strategic emphasis toward the institutional market overall.
July 31, 2018
DUE DILIGENCE Alert: LOW
COMPETITIVE Alert: 1
Event: Trilinc Global installs new transfer agent and fund accountant.
Briefing Points: i) Trilinc Global has hired Phoenix American Financial Services as its transfer agent and fund accountant, ii) Trilinc is an ETF manager with a focus on Frontier economies and related overseas investments, and iii) The company’s funds invest primarily in Latin America, SE Asia and Sub-Sahara Africa.
Affected Fund(s): All Trilinc Global ETFs
Asset Classes: Non-US Equities
Management Company: Trilinc Global Advisors LLC (Manhattan Beach, CA)
DD Concern: Company or fund product governance and/or business practices
Marketing Considerations: The use of an established US-based administrative service provider signals the firm’s matriculation and intent to build a solid market base. Its focus on Frontier economies is a fairly selected niche with appeal as an opportunistic investment position.
_________________________________
DEFINITION — ALERT RATINGS
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.
