November 30, 2018
DUE DILIGENCE Alert: LOW
Event: M&G Investments offers new equity impact fund in the UK.Briefing Points: i) M&G Investments’ new fund’s selections will come from the MSCI All Country World Index of 2500 global stocks of companies operating in “countries where there are social issues,” ii) the fund will invest in companies that aim to address social and environmental issues – decided by following the United Nations Sustainable Development Goals (SDGs). These are targets that aim to end poverty, protect the planet and create peace and prosperity, and iii) the fund will be comprised of 30 to 40 stocks meeting M&G’s Positive Impact team’s mission of targeting “companies that are already having impact on society
COMPETITIVE Alert: 4
Affected Fund(s): M&G Impact Equities StrategyAsset Classes: Global & Emerging Equities
Management Company: M&G Investment Management, Ltd. (London, UK)
DD Concern: Overweight or concentration, shift or tilt to ESG positions
Marketing Considerations: The manager’s focus on the UN’s SDGs and companies offering potentially large impacts in countries with “social issues” aligns with rising interest in the UK in principles-based investing. A recent survey by finance firm Boring Money found the majority of investors in the UK thought impact investing in healthcare and green energy was important. But the survey also showed that concerns about giving up returns still polarized investors and was not necessarily falling away. If successful, this could also be a potential selling point both for non-US and US markets.
November 20, 2018
DUE DILIGENCE Alert: LOW
COMPETITIVE Alert: 2
Event: Robo-Advisor, Nutmeg, introduces new socially responsible portfolios in the UK.
Briefing Points: i) UK-based Robo-Advisor Nutmeg is now offering to its platform users, a suite of 10 SRI portfolios, ii) The new portfolios reflect different risk levels by mixing various ETFs and allocations, and iii) As part of the new offerings, Nutmeg is providing “scorecards” based on MSCI data, that rank each portfolio’s sustainability status relative to various “ESG principles.”
Affected Fund(s): Nutmeg SRI ETF
PortfoliosAsset Classes: All
Management Company: Nutmeg Advisory Group, Ltd. (London, UK)
DD Concern: New Untested Mandate
Marketing Considerations: While the firm’s ability to successfully manage its new “untested” strategies is a factor, the risk implications and behavior is a core concern. This is especially the case given the strategies exposures to changing asset allocations. The strategies however, give the firm a very real competitive advantage in the domestic robo-advisor market segment. While to our knowledge robo-advisors offering or focusing on socially responsible investment strategies have not gained much traction, developments in this space should be monitored.
November 19, 2018
DUE DILIGENCE Alert: LOW
COMPETITIVE Alert: 2
Event: “Real asset” sustainable offshore opened by NN Investment Partners.
Briefing Points: i) The new offshore fund invests in positions “providing essential public assets and services that typically provide significant social, environmental and economic benefits,” ii) The fund’s holdings are limited to European-based investment grade infrastructure debt including, that supporting transportation, energy,and utilities infrastructure projects, and iii) The fund is a “sub-fund” of the NN (Luxembourg) Alternative Credit SICAV.
Affected Fund(s): European Sustainable Infrastructure Debt Fund
Asset Classes: Non-US Fixed Income
Management Company: NN Investment Partners (Dutch)
DD Concern: New untested mandate
Marketing Considerations: The fund’s mandate is expected to be adopted for the US market, especially in light of growing attention to renovating domestic infrastructure. It is, however, unlikely that the off-shore manager will be the one introducing it stateside, even though they have experience in this mandate.
November 19, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 2
EVENT: Fund Quest announces new sustainable team hire.
Briefing Points: i) Camille Ferron has been hired by Fund Quest to provide quantitative expertise related to integrating portfolios’ “extra-financial characteristics,” ii) Ms. Ferron was previously with Vigeo Eiris, the Paris-London-based CSR assessments and ESG rankings firm, and will also be responsible for “providing customized sustainable services” including “rankings at both the management company level and fund level,” and iii) FundQuest Advisors is part of BNP Paribas Asset Management’s fund selection group.
Affected Fund(s): All BNP Paribas Mutual funds and SMAs
Asset Classes: All
Management Company: FundQuest Advisors
DD Concern: Competitive Strategy Move/Repositioning
Marketing Considerations: The new hire introduces added sophistication to the firm’s manager selection process. Possibly more important, i t”sends” a message to potential sub-advisors that ESG integrations management is becoming a “minimum” standard for sustainable fund mandates.
November 19, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 5
EVENT: Allianz IG launches green bond fund.
Briefing Points: i) Not funded as yet, the fund, with its three share classes, will be actively managed and invest in green bonds issued in developed and emerging markets and non US dollar risk may be hedged, ii) expense ratios range from 0.75% for Class A shares that are also subject to a 3.75% maximum sales charge and maximum CDSC charge of1% while institutional shares are charged a lower 0.50%, and iii) The fund’s benchmark is the ICE BofA/ML Green Bond Index (Fully Hedged to USD).
Affected Fund(s): Allianz IG GreenBond Fund
Asset Classes: Fixed income
Management Company: Allianz Global Investors U.S. LLC
DD Concern: Cash Flow/Liquidity Management
Marketing Considerations: Competition is intensifying in this space as this will be the sixth green bond fund available to investors, given other launches this month (see TIAA-CREF) and BlackRock’s iShares ETF last month. The fund had not been funded as of November 30th and it has not as yet established a fund specific performance track record even as Allianz is likely to have been developing its green bonds assessment and investing expertise via its green bonds investing through other investment vehicles within the firm.
November 16, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 5
EVENT: TIAA-CREF Launched Green Bond Fund and Short-Duration Impact Bond Fund.
BriefingPoints: i) These two funds expand thes.table of TIAA’s sustainable mutual fund offerings, building on the firm’s.successful Social Choice bond, equity and international funds as well as low-carbon mutual funds that have attracted a total of $6.7 billion in net assets across 30 funds/share classes that have placed TIAA as 10th ranked in terms of sustainable fund assets under management (excluding Nuveen’s eight ETFs and $433.9 million), ii) The green fund, launched with five share classes and a combined total of $25 million($21 million of which was allocated to the Institutional Share class) consists of five share classes, including an institutional fund at 45 bps while the retail counterpart will charge a higher fee of 80 basis points, and iii) At the same time, the short-duration impact bond fund brings to market another important shorter-term option for investors and complements the very successful Social Choice Bond Fund in an effort to advance the idea of offering the raw ingredients that can help investors build a complete investment program around actively managed sustainable fixed funds.
Affected Fund(s): TIAA-CREF Green Bond Fund and TIAA-CREF Short-Duration Impact Bond Fund
Asset Classes: US Fixed Income
Management Company: Teachers Advisors, LLC
DD Concern: Cash Flow/Liquidity Management
Marketing Considerations: The green bond fund joins actively managed green bond products now available through Calvert, Mirova and Allianz IG as well as two ETFs offered by VanEck and BlackRock’s iShares that was just launched last month with $45 million in net assets. In total these funds have attracted $290.9 million in net assets as of November 30, 2018 with 57% of the total sourced to the first to market Calvert’s Green Bond Fund with $167.9 million. This is the only one of the six green bond funds and ETFs that will restrict its investments primarily across the investment grade, U.S.-dollar fixed income market. While its new at $25 million and is subject to some diversification constraints and higher liquidity risk until it reaches scale, the firm’s experience with green bonds in the Social Choice Bond Fund gives TIAA an advantage.
November 14, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 3
Event: Nomura teams with American Century on new socially conscious health care fund targeted to Japanese investors.
Briefing Points: i) The new socially responsible health care fund, which is sub-advised by American Century, initially is only available in Japan to Japanese investors, ii) The new fund focuses on US based healthcare companies having sustainable leaning and “positive impacts in society,”and iii) The fund currently has $758 million in AUM and will hold between 30 –50 stocks tied to specific health care impact themes.
Affected Fund(s): Nomura ACT Advanced Medical Impact Fund
Asset Classes: US Equities
Management Company: Nomura Asset Management
DD Concern: New untested mandate
Marketing Considerations: The fund offers the US sub-adviser, a firm that ranks 6th in the US in terms of sustainable assets (exclusions and ESG integration) under management with 25 funds/share classes and $13.1 billion in assets, an opportunity to refine its management record and build expertise in an established market. The reputation value should not be overlooked.
November 9, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 3
Event: Wellington offers a new European-based climate change fund.
Briefing Points: i) Wellington’s new European-based UCITS fund invests to achieve energy efficiency, low-carbon usage, and water and resource management goals, ii) The fund’s “climate-change focused strategy”will have a thematic tilt investing in companies “directly addressing environmental sustainability or climate risks,” and iii) The fund will be managed by Wellington’s global industry analyst (of 10 years), Alan Hsu.
Affected Fund(s): Wellington Climate Strategy(UCITS) Fund
Asset Classes: Global Equities
Management Company: Wellington Management Company (Boston, MA)
DD Concern: New untested mandate
Marketing Considerations: The European-based fund helps to strengthen the manager’s expertise and track record in sustainable investing especially among institutional clients. It also serves a good “testing ground” for building product that may eventually be transferred to the US institutional, and particularly, sub-advisory marketplace.
November 1, 2018
DUE DILIGENCE Alert: MODERATE
COMPETITIVE Alert: 2
Event: Federated launches Federated Hermes SDG Engagement Equity Fund.
BriefingPoints: i) The fund has not been funded as of November 30, 2018 and expense ratios have not be finalized, ii) the fund will seek to invest in companies that contribute to positive societal impact aligned to the United Nations Sustainable Development Goals (the UN Sustainable Development Goals, and iii) In addition to fundamental financial indicator criteria, the fund’s adviser may consider engagement criteria such as assessment of company management competence, integrity, and vision, as well as exposure to one or multiple UN Sustainable Development Goals.
Affected Fund(s): Federated Hermes SDG Engagement Equity Fund
Asset Classes: Global small and medium cap Equities
Management Company: Federated Global Investment Management Corporation, and the fund’s sub-adviser is Hermes Investment Management Limited.
DD Concern: New untested mandate
Marketing Considerations: Federated has wasted no time to launch a sustainable investing product managed by its recently acquired firm that is now majority owned by Federated Investors since its 60%acquisition from the BT Pension Scheme closed in the third quarter. Federated anticipates holding an 89.5%interest in the sub-adviser. As reported last month, Hermes was awarded the “ESG Initiative” award for Europe, marking its 3rd time as a winner of this award. Hermes has developed its own proprietary ESG investment screening tools and established a dedicated stewardship team of 26 experts.
Definitions: Due Diligence Alerts and Marketing Considerations
Due Diligence (“DD”) Alerts: 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.
