Blue Chip Issue 81

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RESPONSIBLE INVESTMENT Superior strategy <strong>Blue</strong> <strong>Chip</strong> speaks to Brendan de Jongh, Head of Research at PortfolioMetrix, about their Sustainable World Equity Fund of Funds launching in South Africa Please tell us about the global groundswell to ESG. Let’s step away from ESG investing as a topic and ignore the warm, fuzzy feeling one gets from “doing the right thing”. For some perspective, it is proposed that a new epoch in geological time is created called the Anthropocene, meaning a period where changes to the earth’s climate, geological processes, biodiversity and species extinction are primarily driven through activities of humans. This impact will ultimately, if unchecked, have a devastating, interconnected impact on human society. Civilisation as we know it today is significantly more fragile than our current response to global challenges suggest. If we consider sustainability through the lens of how much one earth can provide, we are currently consuming 1.5 earths, meaning we are not heading into enemy territory, but are already far behind enemy lines. We have no time left to dither in our response. What you are seeing with the ESG groundswell is simply a rapid catch-up on the realisation that market forces have failed to factor in the “external costs” of our industrialised society. We need to be far more assertively pro-active in our response and, as allocators of capital and overseers of governance, investors can be a powerful force for change. What is PortfolioMetrix’s investment proposition? PortfolioMetrix (PMX) is a specialist investment manager that builds portfolios around needs, not wealth. We question the suitability of one-size-fits-all solutions and believe the best client outcome requires the investment management process to be closely aligned with the adviser’s process, using well-constructed, precision engineered portfolios. Our investment proposition is driven by the understanding that the return path matters and so we focus strongly on a risk-based approach that emphasises portfolio efficiency. Brendan, please give an overview of the PortfolioMetrix BCI Sustainable World Equity Fund of Funds due to be launched in South Africa. The fund is designed for clients who wish to generate a positive social and environmental impact alongside financial returns. It is a South African Collective Investment Scheme that invests in global equity markets by selecting underlying managers that specialise in sustainable equity investing. What is the fund’s strategy, investment philosophy and process? The fund follows the same investment philosophy and process as all portfolios at PMX. This starts with asset allocation and then fund selection and portfolio construction. However, this strategy only selects underlying funds that embrace sustainability and positive change. This means underlying funds only invest in companies delivering a clear, positive benefit to society and the environment through their products, services and business practices. This typically leads to funds that adopt a multi-thematic approach, often aligned to the UN’s Sustainable Development Goals. Do ESG influences offer investors long-term performance advantages when factored into portfolio construction? There is a lot of evidence that individual companies benefit from having a higher ESG rating. Numerous studies have found a higher ESG rating was strongly correlated with a lower cost of capital (the company could raise both debt and equity on easier terms) as well as outperformance in a business sense (higher accounting profits). However, this is not the same as saying that ESG strategies tend to or will outperform over long periods at a portfolio level. This holds more mixed results. What we do know is that, typically, thematic approaches will have biases to certain sectors and may exclude or have very little of other sectors. This will produce variability of returns relative to the broader market. Please tell us about the fund managers selected for the fund. We have populated the fund with underlying managers that specialise in sustainability and impact investing within either developed/emerging markets, listed infrastructure or property. The fund managers have gone through a rigorous due diligence process carried out by us and in our view have a superior investment product within this space. Each fund manager has a unique philosophy and process and will implement their strategy differently. This diversity in implementation creates a product that we believe is uniquely attractive. Why does PortfolioMetrix prefer active funds as opposed to passive funds for its sustainable funds? We believe that sustainable investing is an active management process and the use of passive funds, while cheaper, is less impactful. This is because applying a comprehensive and truly impactful solution requires an in-depth knowledge of a company’s products, services and business operations to understand how the company impacts society and the environment. This process is qualitative as the data provided by companies is never comprehensive and often difficult to interpret. Unfortunately, passive funds are reliant on this data and therefore are not able to implement the strategy effectively in our view. Brendan de Jongh, Head of Research at PortfolioMetrix 66 www.bluechipdigital.co.za PortfolioMetrix Asset Management SA (Pty) Ltd is an Authorised Financial Services Provider.
Investment Management by Design PortfolioMetrix Sustainable World Our Sustainable World portfolios in the United Kingdom will soon have a five year track record. We’re excited to be bringing our global expertise in sustainable investing to South Africa. Watch this space. info@portfoliometrix.co.za portfoliometrix.com PortfolioMetrix Asset Management SA (Pty) Ltd is authorised and regulated financial services provider operating in South Africa, regulated under the Financial Advisory and Intermediary Services Act 37 of 2002 (FSP No: 42383).
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Issue 81 • Oct/Nov/Dec 2021 www.b
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Digitally speaking Blue Chip speaks
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CONTENTS ISSUE 81 OCT/NOV/DEC 2021
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CONTENTS ISSUE 81 OCT/NOV/DEC 2021
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FOREWORD Lelané Bezuidenhout CFP®
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On the money Making waves this quar
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On the money Making waves this quar
Page 18 and 19: COLUMN How do we build your portfol
Page 20 and 21: FPI Life begins at 40 The FPI celeb
Page 22 and 23: FPI EXCLUSIVE Making a difference i
Page 24 and 25: FPI EXCLUSIVE • The FPI designati
Page 26: FPI EXCLUSIVE How has Covid changed
Page 29 and 30: FINANCIAL PLANNER OF THE YEAR there
Page 31 and 32: It truly starts with you In 2006, i
Page 33 and 34: When we won, the effect on existing
Page 35 and 36: INVESTMENT “SPACs provide an inve
Page 37 and 38: My take on responsible investing RE
Page 39 and 40: Finding purposeful investments may
Page 41 and 42: INVESTMENT Hymne, please describe t
Page 43 and 44: The reason we have such specialised
Page 45 and 46: INVESTMENT A combination of both ac
Page 47 and 48: INVESTMENT approach. We have had si
Page 49 and 50: Looking for a true global investmen
Page 51 and 52: OFFSHORE Income Growth. This portfo
Page 53 and 54: CAPEX This could be for new infrast
Page 55 and 56: OFFSHORE Global equity has been the
Page 57 and 58: OFFSHORE There are three reasons fo
Page 59 and 60: Service more clients in less time.
Page 62 and 63: OFFSHORE AN OPPORTUNITY WRAPPED IN
Page 64 and 65: RESPONSIBLE INVESTING CAPITAL CLIMA
Page 66 and 67: RESPONSIBLE INVESTMENT ESG investin
Page 70 and 71: UMBRELLA FUNDS Regulation 38: creat
Page 72 and 73: Hollard Life Solutions launches Lif
Page 74 and 75: RETIREMENT The South African outloo
Page 76 and 77: OIL & GAS EXPLORING THE UPSTREAM Th
Page 78 and 79: EQUITY INDICES How difficult is the
Page 80 and 81: FUND OF FUNDS A differentiated appr
Page 82 and 83: COACHING Difficult conversations. P
Page 84 and 85: COACHING Helping you take your busi
Page 86 and 87: FINTECH A SAFE PLACE TO SUCCEED Blu
Page 88 and 89: RISK TOLERANCE The perils of risk t
Page 90 and 91: COACHING Helping clients through un
Page 92 and 93: GOOD READ Rogues’ Gallery If you
Page 94 and 95: FINANCIAL WELLBEING HEALTH: A NATIO
Page 96 and 97: FEE MODELS IN CHOOSING BETWEEN FLAT
Page 98 and 99: RETIREMENT How shared value can sol
Page 100: Metropolitan works towards creating
Page 103 and 104: ACCELERATE SUCCESS LISPEND MORE TIM
Page 106 and 107: Women in Finance: Breaking Barriers
Page 108 and 109: COMPLIANCE Cross-border data transf
Page 110 and 111: EDUCATION approach to money, much l
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Blue Chip Issue 81

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