November 13, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 3
Event: HSBC Introduces Global Sustainable funds in the UK.
Briefing Points: i) HSBC Global Asset Management (GAM) introduced two global sustainable funds, a multi-asset conservative portfolio and a multi-asset balanced portfolio. The funds are part of the established HSBC GAM multi-asset series, ii) The conservative portfolio has a 35% equity position, while the balanced fund has a 60% equity position, iii) The two new funds will employ the same approaches and each will invest “across asset classes and regions” and will seek a higher average ESG score and lower portfolio carbon intensity than the market. This is to be achieved by including only asset classes in long term allocations where sustainable characteristics can be measured and will follow one or more of the seven industry recognized sustainable investment methods, as set out by the Global Sustainable Investment Alliance.
Affected Fund(s): HSBC Global Sustainable Multi-Asset Conservative Portfolio and HSBC Global Sustainable Multi-Asset Balanced Portfolio
Asset Classes: US and Non-US Equities and Fixes Income
Management Company: HSBC Global Asset Management (London, UK)
DD Concern: New untested mandate
Marketing Considerations: Building off the firm’s well-established global multi-asset record is a clear positive. The firm does, however, need to prove its sustainable investment approach and expertise.
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November 13, 2018
DUE DILIGENCE Alert: LOW
COMPETITIVE Alert: 2
Event: Investec in the UK adds to firm’s sustainable investment team.
Briefing Points: i) Investec has hired Deidre Cooper as portfolio manager to join the firm’s sustainable investment team. Cooper was previously with Ecofin, a sustainable investment specialist, and served as their Head of Research and co-PM for the Ecofin Vista and Global Renewable Infrastructure Fund, ii) Ms. Cooper specialty will focus on renewable energy, decarbonization, and resource efficiency, and iii) Ms. Cooper will support Investec’s transition to energy related analysis and the “deep integration of ESG factors” to the firm’s process.
Affected Fund(s): Investec Global Franchise Fund
Asset Classes: US and Non-US Equities
Management Company: Investec Asset Management, Ltd (London, UK)
DD Concern: Portfolio management team change
Marketing Considerations: The addition to the firm’s management team indicates their growing commitment to sustainable investing. It also reflects an awareness to the evolution of sustainability issues and the development of ESG integrated investment processes, especially their connection to resource-based companies, globally.
November 9, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 4
Event: New iShares filing for global green bond ETF.
Briefing Points: i) The new iShares ETF invests in green bonds or global investment grade bonds whose proceeds are used to finance environmental projects, ii) The ETF will track the Bloomberg Barclays MSCI Global Green Bond Select (USD Hedged) Index, and iii) Exposures to fluctuations in non-US currencies vis-à-vis the USD will be hedged.
Affected Fund(s): iShares Global Green Bond ETF (BGRN)
Asset Classes: US and Non-US Fixed Income
Management Company: BlackRock Financial Advisors (San Francisco, CA)
DD Concern: Cash flow/liquidity management
Marketing Considerations: The ETF is a well-defined addition to the firm’s stable of sustainable ETFs that includes equity and fixed income funds, especially from an asset allocation standpoint. Its leadership role and expertise in managing index funds generally and ETFs in particular can be expected to mitigate start-up risks and tracking error. Once launched, this will be the fourth green bond product offering in the US and only the second green bond ETF after the $25.3 million VanEck Vectors Green Bond ETF. The other two products, offered by Calvert and Mirova, are in the form of mutual funds. In total these funds have attracted $227.1 million in net assets as of October 31, 2018 largely sourced to Calvert’s Green Bond Fund which posted a gain in net assets of $57.3 million due largely to inflows into its institutional share class subject to a $250,000 minimum investment. While green bond funds have been slow to gain traction, assets have expanded by $81.8 million, or 56% this year, and this may be a factor behind BlackRock’s decision to step in with its own green bond offering.
November 9, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 3
Event: Pacer’s socially responsible ETF designed to benefit US arm-forces veterans.
Briefing Points: i) Pacer Advisors is offering a thematic socially responsible ETF that focuses on directly benefiting US arm-forces veterans and is considered by Pacer to be managed as an impact investing fund, ii) In addition to investing in companies that “treat veterans well and make positive impacts on veteran’s lives,” the manager will donate 10% of its management fees to veteran’s causes and charities, and iii) The ETF tracks the Military Times Best for Vets Index, which was developed by VETS Indexes, LLC and calculated by Wilshire.
Affected Fund(s): PACER Military Times Best Employers ETF (VETS)
Asset Classes: US Equities
Management Company: PACER Advisors, Inc. (Paoli, PA)
DD Concern: New untested mandate and/or management team
Marketing Considerations: The ETF’s theme should resonate with segments of the retail middle market but, as is the case with thematic funds more generally, should be considered a non-core investment product for portfolio allocation purposes.
November 2, 2018
DUE DILIGENCE Alert: LOW
COMPETITIVE Alert: 3
Event: Neuberger Berman to acquire natural-disaster risk manager.
Briefing Points: i) Neuberger Berman has purchased Cartesian Re and Bermuda-based reinsurer Iris Re, from their parent company Cartesian Capital Group, LLC, ii) Cartesian specializes in natural disaster reinsurance protection and has approximately $1bn in AUM, and iii) Neuberger is seeking to build its alternative investment capabilities and institutional client reach – Cartesian Re team will remain intact and it will be renamed NB Reinsurance Ltd.
Affected Fund(s): All Neuberger Berman Mutual Funds (NB Socially Responsible Funds), Alternatives & SMAs
Asset Classes: All
Management Company: Neuberger Berman, Inc. (New York, NY)
DD Concern: Competitive strategy move/repositioning
Marketing Considerations: Limited if any short-to-intermediate-term effects are expected. Over the long-term, the integration of risk-management capabilities could give the firm a unique and established advantage.
October 31, 2018
DUE DILIGENCE Alert: LOW
COMPETITIVE Alert: 2
Event: Hermes Investments selected as “ESG Initiative” leader in Europe.
Briefing Points: i) Hermes was awarded the “ESG Initiative” award for Europe, marking its 3rd time as a winner of this award, ii) The award, which is sponsored by the Financial News, recognizes Hermes record of placing ESG issues as central to all its “investment decision-making – including credit portfolios” and approaches, and iii) Hermes has developed its own proprietary ESG investment screening tools and established a dedicated stewardship team of 26 experts.
Affected Fund(s): All Hermes investment funds and SMAs
Asset Classes: All
Management Company: Hermes Investment Management (London, UK)
DD Concern: Public perception, recognition and/or reputation value
Marketing Considerations: The consistency of the firm’s award position indicates an established level of corporate dedication to sustainable investing. The firm, which is majority owned by Federated Investors since its 60% acquisition from the BT Pension Scheme closed in the third quarter, has been positioned by Federated to serve as the cornerstone of Federated’s global ESG platform by adopting Hermes’ ESG philosophy and investment approach. This is expected to be imported to the US eventually and in turn, Federated’s fund offerings.
DEFINITION — ALERT RATINGS
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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. Non-US fund offerings will typically be assigned Low Due Diligence Alert levels as these are largely intended for informational purposes and potentially these may have marketing considerations locally.
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.
