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JP Morgan Asset Management Launches a Multi-Asset Fund with a Focus on ESG

future-431270_1920 — Pixabay CC0 Public Domain. JP Morgan AM lanza un fondo multiactivo con enfoque sostenible

JP Morgan Asset Management has launched the Global Income Sustainable Fund (SICAV), a globally diversified multi-asset income fund with a sustainable focus. In a press release, the asset manager has announced that this vehicle will complement its flagship JPMorgan Investment Funds – Global Income Fund, with 29 billion dollars in assets under management.

The new fund will be run by the same portfolio managers, Michael Schoenhaut and Eric Bernbaum, and will use the same investment philosophy as the Global Income Fund, taking a flexible approach to seeking out the best sustainable income opportunities from around the globe, leveraging sustainable exclusions and a positive environmental, social and governance (ESG) tilt.

Also, JP Morgan AM has revealed that the new offering will go further on ESG with two additional sustainability characteristics. First, it will exclude companies from 10 unsustainable sectors based on client values, industry norms and regulation. Second, leveraging the firm’s well-established global research capabilities for finding attractive income-producing investments globally, the Global Income Sustainable Fund will be tilted towards securities with more effective governance and superior management of environmental and social issues.

This, in their view, will produce a portfolio with a higher overall ESG score and a materially lower carbon footprint. Reflecting the Global Income Sustainable Fund’s concentration on ESG leaders, the two funds are expected to only have about 30% overlap in holdings. The new vehicle, which will have a TER of 75 basis points (C share class), is expected to register 65% lower carbon emissions than the multi-asset income investment universe.

“In the continued incredibly low yield environment, investors need more sustainable sources of diversified income. For more than a decade with our Global Income Fund, we’ve provided investors with a disciplined and rigorous approach, supported by strong research capabilities, to finding the best risk-adjusted income opportunities globally, across multiple geographies and asset classes. We’re thrilled to now expand our offering with this dedicated sustainable multi-asset income fund,” said Massimo Greco, Head of EMEA Funds at JP Morgan AM.

Meanwhile, Rob Stewart, Global Head of the Multi-Asset Solutions Investment Specialist team, pointed out that a huge challenge for sustainable multi-asset income investing is incorporating widely varying ESG factors, from across different asset classes, and bringing those together into a diversified portfolio that produces attractive risk-adjusted income.

“That’s why we believe it is critical for sustainable multi-asset investors to leverage well-established fundamental and quantitative research capabilities. We’re able to draw on over 50 years of experience in multi-asset investing. This enables us to optimize top-down global asset allocation to strive for stable income, while the fund’s bottom-up asset class specialists focus on the most sustainable securities within their respective sub-asset classes,” he added.

Pandemic Caused 220 Billion Dollars of Global Dividends Cuts in 2020

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scissors-2759721_1920 — Pixabay CC0 Public Domain. La pandemia provocó recortes por valor de 220.000 millones de dólares en los dividendos a escala mundial en 2020

The cuts or cancellation of dividends made headlines during the worst part of the pandemic. Now, according to the latest Global Dividend Index from Janus Henderson, we know that global dividends fell 12.2% to 1.26 trillion dollars in 2020. On an underlying basis, this means dividends were 10.5% lower in 2020.

In a press release, the asset manager reveals that this data is better than its initial best-case forecast of 1.21 trillion dollars thanks to a less severe fall in Q4 payouts than anticipated. On an underlying basis, the decline was smaller than after the global financial crisis. Janus Henderson’s index of global dividends fell to 172.4, a level last seen in 2017.

The dividend cuts were most severe in the UK and Europe, which together accounted for more than half the total reduction in payouts globally, mainly owing to the forced curtailment on banking dividends by regulators. “But even as payouts in Europe and the UK fell below the levels seen in 2009 when our index began, they rose 2.6% on a headline basis in North America to a new record”, points out the asset manager’s study.

In its view, North America did so well mainly because companies were able to conserve cash and protect their dividends by suspending or reducing share buybacks instead, and because regulators were more lenient with the banks. In Asia, Australia was worst affected, due to its heavy reliance on banking dividends, which were constrained by regulators until December. Elsewhere, China, Hong Kong and Switzerland joined Canada among the best performing nations.

The analysis shows that Q4 payouts fell 14% on an underlying basis to a total of 269.1 billion dollars while the headline decline was just 9.4%. This was less severe than expected as companies like Sberbank in Russia and Volkswagen in Germany restored suspended dividends at full strength, while others like Essilor in France brought them back at a reduced level.

Also, special dividends were also larger than expected, while in the US the dividends announced for the next four quarterly payments were better than expected.

Clearly, COVID-19 affected global dividends: although the cuts and cancellations totalled 220 billion dollars between April and December 2020, companies nevertheless paid their shareholders 965 billion dollars, still far outweighing the reductions. One company in eight cancelled its payout altogether and one in five made a cut, but two thirds increased their dividends or held them steady.

The study shows that banks accounted for one third of global dividend reductions by value, more than three times as much as oil producers – the next most severely affected sector. Six in ten consumer discretionary companies cut or cancelled payouts, but the classic defensives – food retail, pharmaceuticals and personal products – were well insulated. Among the world’s larger stock markets, the impact in Spain and France was particularly widespread with 71% of companies making reductions compared to just 9% in Canada.

The outlook

Janus Henderson believes that 2021 will see payouts fall, although the decline is likely to be smaller than between Q2 and Q4 2020. The outlook for the full year remains “extremely uncertain”.

“The pandemic has intensified in many parts of the world, even as vaccine rollouts provide hope. Importantly, banking dividends will resume in countries where they were curtailed, but they will not come close to 2019 levels in Europe and the UK, and this will limit the potential for growth. Those parts of the world that proved resilient in 2020 look likely to repeat this performance in 2021, but some sectors are likely to continue to struggle until economies can reopen fully”, says the asset manager.

In its view, a slow escape from the pandemic, and the drag caused by the first quarter, suggest that dividends may fall by 2% (headline) for the full year in a worst-case scenario (-3% underlying). Its best-case at this stage suggests an increase of 2% on an underlying basis, equivalent to a headline rise of 5%, yielding a total of 1.32 trillion dollars.

“Although the pandemic has changed the lives of billions in previously unimaginable ways, its impact on dividends has been consistent with a conventional, if severe, recession. Sectors that depend on discretionary spending have been more severely impacted, while defensive sectors have continued to make payments“, said Jane Shoemake, Client Portfolio Manager on the Global Equity Income Team at Janus Henderson.

“At a country level, places like the UK, Australia and parts of Europe suffered a greater decline because some companies had arguably been overdistributing before the crisis and because of regulatory interventions in the banking sector. But at the global level, the underlying 15% year-on-year contraction in payouts between Q2 and Q4 has been less severe than in the aftermath of the global financial crisis”, she added.

Professional Fund Selectors Anticipate Heightened Risk in 2021 but Are Optimistic about Market Opportunities

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traffic-light-876050_1920 — Pixabay CC0 Public Domain. Los selectores de fondos profesionales anticipan un mayor riesgo en 2021, pero son optimistas sobre las oportunidades de mercado

Natixis Investment Managers recently published the results of its annual Global Survey of Fund Selectors, which found that, against the backdrop of continued market volatility and negative interest rates, professional buyers are positioning portfolios to capture the upside potential in 2021.

The survey was conducted last November and December among 400 investment professionals, including fund selectors at independent financial advisors, registered investment advisors, insurance company investment platforms, private banks and family offices around the world, representing 12.7 trillion dollars in assets.

One of the conclusions of Natixis IM is that, despite the newfound optimism provided by the approval of the Pfizer and Moderna vaccines towards the end of 2020, six in ten fund selectors believe the COVID-19 “new normal” is here to stay and two-thirds predict the global economy will not recover from it in 2021.

Significant concerns about the pandemic and politics have not necessarily translated into a negative view on markets and the majority (80% of those surveyed) believe central banks will support the market in the event of another downturn.

According to respondents, volatility and negative rates are the first and second portfolio risks for global fund buyers in 2021, at 49% and 39% respectively. Other risk concerns included inflation (37%), a credit crunch (34%) and liquidity issues (25%).

With more fiscal and monetary stimulus likely to come from policy makers, fund selectors think stocks have even more room to run in 2021 and will look around the globe for opportunities.

In this sense, projections at the end of Q4 2020 favored a risk-on strategy, with 61% calling for small-caps to outperform large-caps, 60% predicting emerging markets to outperform developed markets, and 66% saying aggressive portfolios will outperform defensive in 2021. Fund selectors will be focusing on finding the potential bright spots in difficult markets and 70% forecast active investment will outperform passive in 2021.

“2020 marked a year of extreme challenges for markets that went beyond the health pandemic, including climate events and natural disasters, political tensions and the fastest market correction in history. Uncertainty continues and concerns are mounting that financial markets may have entered bubble territory. However, fund selectors surveyed view market risk as an opportunity, while acknowledging close analysis is required to uncover the opportunities to generate alpha for clients”, said Matt Shafer, Head of Wholesale & Retail Distribution, Natixis Investment Managers commented:

An optimistic vision

According to the survey results, optimism carries over into sector views and pro buyers are particularly bullish on healthcare, with 56% of those surveyed calling for the sector to outperform, followed by consumer discretionary (46%), information technology companies (45%) and energy (44%) and financials (44%).

ESG investing has remained a consistent focus area for global fund buyers. ESG strategies were a proven winner from the market turmoil in 2020 and 57% of respondents believe outperformance will continue in 2021. To access the full breadth of opportunities in the market, more than half of fund buyers intend to add to their model portfolios offering and enhance their lineup with specialty strategies for ESG and thematic investing.

Adapting asset allocation

In an environment of low to negative interest rates and slow growth, the survey revealed that value investing is making a comeback in 2021. Entering 2020, fund buyers focused their attention on sectors with strong secular growth drivers, while conversely, in 2021, 63% of fund buyers anticipate that value stocks will outperform growth.

Over one third (36%) of fund selectors surveyed intend to reduce their US equity holdings to capitalise on the opportunities presented by market performance in other territories, with 55% planning to acquire APAC stocks.

Against a backdrop of continued market volatility, Natixis IM shows that fund buyers seek to reorientate portfolios to take advantage of the emerging markets opportunity beyond Asia, with 65% of participants stating that emerging markets are more attractive now than they were before Covid-19. Moreover, 52% of participants confirm that they will be increasing their emerging markets positions.

Concerns about investor risk appetite

Given that fund selectors see the potential for greater volatility and are projecting value stocks to outperform growth, 83% believe markets will favor active investments in 2021.

The asset manager believes that commitment to active strategies was likely reinforced last year, when two-thirds say active investments on their firm’s platform outperformed during the market downturn.

“There is growing concern amongst professional buyers that individual investors will be able to successfully navigate the risks they face in 2021″, the survey points out. In Natixis IM’s view, the strong market performances throughout the pandemic is likely to have caused retail investors to take on risk more carelessly than before Covid-19 and 78% of fund buyers have concerns that increased volatility will cause individuals to liquidate their investments prematurely.

As a result, fund selectors see their firms transforming the investment offering to achieve greater consistency across client portfolios to better meet client needs, with 80% saying the emphasis is on quality rather than quantity. Given the focus on riskier, more volatile assets and concerns about potential liquidations, more than half (54%) among the 295 professional buyers whose firms offer clients model portfolios anticipate that they will move more clients to model portfolios in 2021.

IK Investment Partners and Luxempart Become Investors of iM Global Partner

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philipe — Foto cedidaPhilippe Couvrecelle, consejero delegado y fundador de iM Global Partner. IK Investment Partners y Luxempart se incorporan como socios a iM Global Partner

The project of Philippe Couvrecelle, iM Global Partner, enters a new phase in its development, welcoming two new investors. IK Investment Partners and Luxempart have bought part of Eurazeo‘s stake in the company, subject to the approval of the French Autorité des Marchés Financiers and the Commission de Surveillance du Secteur Financier.

In a press release, iM Global Partner highlighted that the addition of both firms as shareholders marks an important step in the development of the company. It believes their support strengthens its development potential and will accelerate its growth for years to come. iM Global Partner’s strategy is to continue to invest, both organically and through external growth, to further develop the company with the aim of exceeding 100 billion dollars in assets under management within five to seven years.

Following the transaction, Eurazeo, as a controlling shareholder, will continue to actively support the company alongside shareholders IK Investment Partners, Luxempart and Amundi. Proceeds from the disposals relating to this transaction of 20% of the capital represent about 70 million dollars for Eurazeo, a cash-on-cash multiple of 2.1x and an internal rate of return of 22%. Dassault/La Maison, a shareholder from the outset, sold its stake at the time of the operation.

A growth story

“We are pleased to welcome IK Investment Partners and Luxempart alongside Eurazeo and Amundi, which have been accompanying and supporting us since the beginning of this great adventure. Together, we will continue to develop our unique asset management model and further accelerate the growth of our activities worldwide“, stated Philippe Couvrecelle, CEO and founder of iM Global Partner.

Also, Marc Frappier, Managing Partner of Eurazeo and Head of Eurazeo Capital, said that their strong belief in the growth of the asset management profession, coupled with “the talent and the vision” of Couvrecelle, led them to support the development of “an innovative network bringing together the best managers worldwide and leading distribution capacities”.

As for the new investors, Thomas Grob, Partner at IK Investment Partners, added that they were impressed by the growth trajectory, quality of the teams, international nature and development project of iM Global Partner. “We are pleased and proud to have won the trust of Philippe Couvrecelle, Eurazeo and Amundi to join them in contributing to the company’s growth story”, he commented.

Lastly, Olaf Kordes, Managing Director of Luxempart, claimed to be pleased to be able to join the group of the firm’s shareholders: “We have been convinced by the quality and vision of the management team. We are very keen to continue supporting the development of this leading player with significant international ambitions. This operation is perfectly in line with Luxempart’s revised strategy, which aims to support first-rate management teams in their development projects over the long term”.

This transaction comes after iM Global Partner, a global network dedicated to asset management, increased its assets under management by 65% -of which 46% was organic growth- to more than 19 billion dollar in the year to end December 2020. With Eurazeo and Amundi, which have supported Couvrecelle and the management team since the company’s inception, iM Global Partner has become a major international asset management network in just a few years.

BNP Paribas AM Appoints Sandro Pierri Deputy CEO

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sandro OK — Foto cedidaSandro Pierri, Deputy CEO y director de Global Client Group de BPN Paribas AM.. BNP Paribas AM nombra a Sandro Pierri para el cargo de Deputy CEO

BNP Paribas Asset Management announced this week the appointment of Sandro Pierri as Deputy CEO, with effect from 1 January 2021. He will be based in London and report to Frédéric Janbon, CEO of the firm.

In a press release, the asset manager revealed that he will maintain his current role as Head of the Global Client Group, which he has held since 2017. “I am honored to have been given this new responsibility and by the confidence placed in me to contribute more widely to the development of our company”, Pierri said.

Meanwhile, Janbon highlighted that Pierri has transformed their Global Client Group into an efficient sales platform. “In expanding his responsibilities, Sandro will bring his invaluable expertise to additional transversal projects. This appointment reflects the breadth of his contribution to our company and his commitment to developing our culture and values for the benefit of our clients”, he added.

Three decades in the industry

Pierri has more than 30 years’ experience in the asset management industry. He joined BNP AM in 2017 as Head of the Global Client Group, its global sales and marketing organization. The asset manager believes that he has contributed to implementing their growth plan, positioning them as “a key player offering high added value investment solutions for individual savers, companies and institutions”.

Pierri began his career in 1989 as a portfolio manager with San Paolo Fondi, moving to BNL Gestioni in 1992, before joining ING Investment Management in Italy in 1994, where he held several commercial roles.

Between 2002 and 2003 he was Chief Executive of ING Group’s Italian retail business. Following the acquisition by UniCredit/Pioneer of ING’s Italian business, he joined Pioneer Investments, UniCredit’s asset management division, in 2004, where he spent 10 years in various commercial and managerial positions, including CEO in 2012. Pierri graduated in Economics from the Università degli Studi di Torino, Italy.

Merian Funds to be Renamed Under Jupiter’s Brand

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start-5896294_1920_0 — Pixabay CC0 Public Domain. Jupiter AM cambia la denominación de los fondos Merian a Jupiter

Jupiter has completed the renaming of Merian products in line with its existing fund range. The asset manager announced in a press release that, following its acquisition of Merian Global Investors in 2020, this decision is one of the final milestones in the creation of a single unified business operating solely under the Jupiter brand.

With immediate effect, Merian branded products will lose the Merian badge, instead taking on the Jupiter name and branding. For example, the Merian Gold & Silver Fund, managed by Ned Neylor-Leyland, will become the Jupiter Gold & Silver Fund.

While the majority of funds will make the switch to the Jupiter prefix, the Merian Systematic Equity fund range, headed by Ian Heslop and Amadeo Alentorn, will now be renamed to “Jupiter Merian”. Meaning, for example, the Merian North American Equity Fund will become the Jupiter Merian North American Equity Fund.

“We are delighted to have completed this project, making it clear that we are now one business with one brand, moving forward as one. The Jupiter brand has a long heritage. While the essence of the brand hasn’t changed, we believe that this new visual identity builds on this established heritage while also reflecting the active, innovative, international asset management firm we are today”, Phil Wagstaff, Jupiter’s Global Head of Distribution, said.

Broader brand refresh

Furthermore, as part of this rebranding process, the asset manager has launched a new website with a refreshed visual identity. Jupiter’s logo has been updated, and all fund collateral, including advertising, has also undergone a refresh. Going forward, all information and materials concerning the combined fund range can be found on the Jupiter website.

Allfunds Blockchain Partners with ConsenSys to Advance Blockchain Technology for the Financial Sector

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block-chain-3055701_1920 — . Allfunds Blockchain y ConsenSys se asocian para desarrollar la tecnología blockchain en la industria de fondos

Allfunds Blockchain, the blockchain technology arm of Allfunds launched in 2020, has signed a partnership with ConsenSys, leading Ethereum software company, to drive blockchain technology in the financial sector, specifically in fund distribution.

Allfunds explained in a statement that, historically, traditional fund transfer between financial entities, intermediaries and third-party payment systems has been a complex process. But, in its view, blockchain technology “can revolutionize fund distribution by dramatically reducing processing and settlement times, while providing a secure system for multiple parties with no single point of failure”.

Through this agreement, the firm will combine its Technical Solutions area with ConsenSys Quorum to power its funds industry platform. Furthermore, both companies are working together to further develop and support the Allfunds Blockchain Technical Solution in combination with ConsenSys Quorum, an open-source protocol layer for developing with Ethereum.

Allfunds revealed that the solution includes advanced privacy features that enable participants in a blockchain network to control, at a granular level, who is allowed to see information, and what nodes participate in the consensus validation of data containing confidential information.

A “truly unique” blockchain product

“We are thrilled to be partnering with ConsenSys to bring this revolutionary blockchain solution to the wider market. Through its expertise, our clients will benefit from a truly unique blockchain product. We selected ConsenSys Quorum to be our enterprise blockchain protocol because of its significant adoption in enterprise blockchain and the ongoing development and support it provides. This is another important step forward in the evolution of Allfunds Blockchain technology”, said Rubén Nieto, Managing Director at Allfunds Blockchain.

Madeline Murray, Product Lead at ConsenSys Quorum, stated that they are seeing growing global interest in ConsenSys Quorum, the open-source enterprise Ethereum protocol built to simplify the use of enterprise blockchain. “This partnership with Allfunds will further facilitate global blockchain adoption for the funds industry and enrich the ecosystem with technical innovations suitable for advanced privacy use cases”, she added.

Valérie Baudson Will Replace Yves Perrier as CEO of Amundi as of May 2021

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During the presentation of its annual results, Amundi announced that Valérie Baudson will replace Yves Perrier as CEO of the company. Meanwhile, Perrier has been appointed Chairman of the board of directors.

According to Europe’s biggest asset manager, this change in leadership will take place next May 10, when Perrier will formally step down. “After 14 years as head of Amundi, Yves Perrier has wished to hand over the general management responsibility. Under his leadership, Amundi enjoyed outstanding development, becoming the indisputable European leader and one of the world leaders in asset management, recognised for the strength of its business model, its growth momentum and its position as a financial player committed to society”, said Xavier Musca, current Chairman of the board, a position he will hold until May 2021.

Musca explained that Perrier will succeed him at the chairmanship, which will allow the company to continue to benefit from his exceptional experience. “This change in governance will ensure a smooth transition and the continuity of Amundi’s development, and will take place following the next Amundi general meeting on 10 May 2021″, he added.

Baudson thanked the board and the general management of the Crédit Agricole Group for the confidence they have shown in her. “It is a honor to be appointed Chief Executive Officer of Amundi and to succeed Yves Perrier, who has built a global leader in asset management. I know that I can rely on his support. I look forward to continuing to develop the company to which I have dedicated my efforts for the past 14 years, in line with our strategy, which has been driving Amundi’s success since it was founded”, she pointed out.

Lastly, Perrier looked back at 2020 and highlighted that Amundi demonstrated the strength of its business model through its economic and financial performance. “2020 also saw the launch of several strategic initiatives that will support the future growth of the company: the renewal of the partnership with Société Générale, the acquisition of Sabadell AM combined with a long-term distribution agreement with Banco Sabadell in Spain, and finally the launch of the new subsidiary in China with BOC”, he concluded.

2023 – A Broader Economic Revival?

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U.S. stocks rebounded in January, a reprieve for investors who endured a challenging 2022. The rally for stocks was driven by investors’ increased confidence that interest rates may be near peak levels. The market is starting to price in the possibility that the Federal Reserve may soon pause rate hikes followed by interest rate cuts in the second half of 2023. As a result, riskier assets have benefitted from the rally, such as growth companies as well as stocks with high short interest. While general market sentiment improved, there is some caution on whether the move represented a real inflection point or yet another bear-market trap.

As January concluded, the market entered the busiest part of the Q4 earnings season. While only a portion of companies have reported thus far, management commentary remains conservative amid the uncertain demand backdrop. Despite lower earnings expectations, the tone of the market seemed to align more with soft-landing expectations than hard-landing scenarios.

On February 1st, the Federal Reserve announced a 25bps rate hike at the end of its two-day policy meeting, citing persistent inflation. This hike now brings the targeted federal funds rate to 4.50-4.75%, up from 0.00-0.25% prior to the initial increase in March 2022. The Fed anticipates that ongoing increases in the target range will be appropriate in order to return inflation to 2% over time. Fed Chair Jerome Powell said that the full effects of interest rate increases had yet to be felt, and that there was still more work to do. The next FOMC meeting is March 21st-22nd.

After almost three years, China reopened its borders on January 8th and ended a requirement for incoming travelers to quarantine, dismantling the last component of its stringent zero-COVID policy. Investors are optimistic that the reopening and recovery of the world’s second-largest economy should help spur a broader economic revival.

Merger arb performance in January was bolstered by deals that made significant progress towards closing. Shaw Communications (SJR/B CN-C$39.60-Toronto) and Rogers Communications were victorious defending their C$25 billion merger against the Canadian Competition Bureau in Canada’s Federal Court of Appeals. The parties now await approval from the Canadian Department of Innovation, Science and Economic Development, the final remaining approval before the deal can close. South Jersey Industries, Sierra Wireless, and Meridian Biosciences each received the final required regulatory approvals and the three deals closed in January. Deals announced in January including Evoqua Water Technologies’ $8 billion acquisition by Xylem, Magnet Forensics’ C$1 billion acquisition by Thoma Bravo, and CinCor Pharma’s $2 billion acquisition by AstraZeneca are creating new opportunities for investment.

Convertibles got off to a strong start in 2023 with the best month for performance since 2020, led by a number have factors, but generally the appetite for risk has increased to begin the year. Additionally, we have seen some of the worst performers from 2022 be the best performers YTD. A few of our fixed income equivalent holdings have benefited from a “credit delta” where an improved perception of a company’s balance sheet and access to capital causes investors to bid up the bonds. The result has been one month returns that many investors were expecting for the entirety of 2023.

We continue to see opportunity in the convertible market this year. The fixed income equivalent issues still offer compelling yields to maturity even after the recent moves. Many of these bonds are the only debt on the balance sheet and have 3 to 4 years until maturity. We expect these bonds to accrete to par over time, building a solid foundation for performance. We have seen some companies address these bonds by buying them back in the open market or by offering an exchange for a new convertible. We anticipate more exchange offers as the year progresses. It is also likely that some convert issuers will be acquisition targets which would make their bonds puttable at par if the acquisition is for cash, or convertible into the acquiring company if shares are used. Either outcome should be desirable to convert owners.

New issuance continued to be anemic this month, but what did come saw significant demand with upsized deals pricing at the rich end of the price talk. We expect companies to use convertibles when raising capital this year to reduce interest expense and extend maturities in a covenant lite structure. We believe many companies have delayed coming to the market and converts offer an attractive way for companies to add low cost capital to their balance sheets. Continued issuance allows us to stay current and we expect to selectively layer new issues into our portfolio to maintain the asymmetrical risk profile we are seeking to achieve.

GAM Launches its New Range of ESG Strategies with a Local Emerging Bond Fund

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nature-1283976_1920 — Pixabay CC0 Public Domain. GAM estrena su nueva gama de estrategias ESG con un fondo de bonos locales de mercados emergentes

GAM Investments has announced the inauguration of its first range of sustainable investment strategies with the launch of a local emerging market bond fund. The new approach was developed in close partnership with VBV-Pensionskasse, a leading pension fund for sustainable investments in Austria.

In a press release, the asset manager pointed out that the strategy will be managed by its emerging markets debt team and it’s the first in a range of sustainable investment strategies the firm plans to launch throughout 2021.

“The new strategy draws upon the expertise of Paul McNamara and GAM’s highly experienced emerging markets debt team, whose differentiated, conviction-driven approach to EM debt investing has been developed over 20 years”, GAM says. Its goal is to generate long-term financial returns by investing in a way that is sensitive to the impact decision making may have on society and the environment.

The approach combines a positive tilt towards sovereigns with higher environmental, social and governance (ESG) scores, as defined by its benchmark, the JP Morgan ESG GBI-EM GD Index, with the team’s proprietary investment process incorporating ESG factors for active allocation within the index tilts. The JP Morgan ESG GBI-EM GD Index leverages research from both Sustainalytics and RepRisk therefore allowing investors to combine the benefits offered by active management applied to an ESG benchmark, highlights the asset manager.

A “crisis cycle filter”

Its process mirrors that of the long-running local emerging bond strategy. Based on its assessment of developments in the US, Europe and China, the team establishes global themes that determine country selection, along with specific return and risk driver preferences. Given the emphasis on crisis avoidance, country analysis is then performed using the team’s proprietary ‘Crisis Cycle Filter’. This captures the interaction between core ESG factors and nine traditional macroeconomic variables considered to be highly reliable, early indicators of financial crises, such as falling FX reserves or rapidly rising inflation.

The strategy typically has active exposure to 15-25 emerging and frontier markets, centered upon approximately 10 very liquid core markets and 100-150 bonds and FX forwards.

“We have taken ESG factors into account in our investment process for our local emerging bond strategy for a number of years, purely for their impact on risk-adjusted returns. However, as ESG factors become more efficiently priced in the sovereign debt market, we believe that now is the time for a strategy that targets both a specific ESG tilt and integrates ESG factors from a risk/return perspective”, Paul McNamara, Investment Director for emerging market debt at GAM, said.

Meanwhile, Günther Schiendl, member of the Executive Board of VBV-Pensionskasse, commented that they invest responsibly, sustainably and with a focus on performance. “Particularly in the area of fixed-income emerging markets, a new approach that increasingly takes ESG criteria into account was important to us, as this type of solution has been rare so far”, he added.

Lastly, Stephanie Maier, Global Head of Sustainable and Impact Investment at GAM, pointed out that they have seen a “clear client demand” for more strategies focused on sustainable investing, so they are working in partnership with them to develop these. “The sustainable local emerging bond strategy combines the benefits of using a well-established ESG benchmark, with the opportunity to benefit from active management and expertise of GAM’s emerging markets bond team. Later this year, we plan to launch additional ESG focused products, further building on our award winning Swiss Sustainable Companies strategy, which has a track record of more than 20 years”, she revealed.