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Worldwise Investor launch presentation
- 1. worldwiseinvestor.com Worldwise Investor - helping investors to make educated choices? By Mark Hoskin
- 2. The growing importance of sustainability 04/10/2011 www.worldwiseinvestor.com 2 Pictet Video: Environmental megatrends
- 3. Mock ecocide trial 04/10/2011 www.worldwiseinvestor.com 3
- 4. A growing market • 130 funds today, five years ago 66 • There are now £21.8bn of assets invested in funds available to the UK investor in thematic, environmental and ethical funds. In 2000 EIRIS estimated the market at £1.5 billion. 04/10/2011 www.worldwiseinvestor.com 4 £0 £500,000,000 £1,000,000,000 £1,500,000,000 £2,000,000,000 £2,500,000,000 £3,000,000,000 £3,500,000,000 Assets under Management by Investment House Assets under Management
- 5. A growing market – led by thematic funds 04/10/2011 www.worldwiseinvestor.com 5 Thematic Funds Worldwise Investor Funds 0 20 40 60 80 100 120 140 5 YR 3 YR 1 YR 26 56 74 66 105 130 Thematic Funds Worldwise Investor Funds
- 6. The ethically screened market 04/10/2011 www.worldwiseinvestor.com 6 Ethical Funds Worldwise Investor Funds 0 20 40 60 80 100 120 140 5 YR 3 YR 1 YR 46 56 60 66 105 130 Ethical Funds Worldwise Investor Funds
- 7. The Growth in Thematic Funds 04/10/2011 www.worldwiseinvestor.com 7 7,282 3,296 1,961 1,210 723 661 4 Global Thematic Funds AUM (£m) WWI Agriculture WWI Water WWI Thematic WWI Clean Energy WWI Environmental WWI Forestry WWI Carbon
- 8. 5 Year Performance to 30th Sept 2011 04/10/2011 www.worldwiseinvestor.com 8
- 9. 3 Year Performance to 30th Sept 2011 04/10/2011 www.worldwiseinvestor.com 9
- 10. 1 Year Performance to 30th Sept 2011 04/10/2011 www.worldwiseinvestor.com 10
- 11. Mercer, the institutional adviser: “Portfolio risk could increase by 10% in the next 20 years as a result of climate change and have recommended that at least 40% of an institutional portfolio should include investment in climate change mitigation and adaption.” 04/10/2011 www.worldwiseinvestor.com 11
- 12. Sustainability definition: Sustainable development was defined in 1987, by the UN as: “development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” 04/10/2011 www.worldwiseinvestor.com 12
- 13. What should IFAs be doing? • Include Worldwise Investor funds into the mix to enrich an investment portfolio. • Sustainability is a concept all clients understand and buy into. Investment funds with sustainable analysts are awake to dangers other funds are not. • Efficiency in business reduces the use of natural resources and increases profits. • Natural Resources are a theme all clients understand – water, timber, food and energy are basic needs facing huge challenges in the future. • There is no need to be afraid of advising in environmental, or ethical funds. It can differentiate you as an adviser and it is easy to advise on using worldwise investor…. 04/10/2011 www.worldwiseinvestor.com 13
- 14. So dip your toe in the water! 04/10/2011 www.worldwiseinvestor.com 14
- 15. The issue IFA Investment Houses Fund Fact sheets 04/10/2011 www.worldwiseinvestor.com 15
- 16. Part of the solution 04/10/2011 www.worldwiseinvestor.com 16
- 19. Export report to pdf 04/10/2011 www.worldwiseinvestor.com 19
- 20. Fund view 04/10/2011 www.worldwiseinvestor.com 20 Cheviot news Main news relating to this fund Our summary Cheviots summary & information Key facts & stats
- 21. Fund view 04/10/2011 www.worldwiseinvestor.com 21 Management of the fund ethical screens Where to buy
- 22. What is the site about? Worldwise Investor is a free resource to UK investors and advisers, providing a single point of reference for investment performance and news on investment funds within the thematic, environmental and ethical investment fund industry 04/10/2011 www.worldwiseinvestor.com 22
- 23. Key benefits Filter funds: use the fund library to view individual or funds by theme & create a pdf of the results Make fund comparisons: view funds within their peer group Read the news: on individual funds published on the site by the Investment Houses on ethical and environmental developments and how they impact funds (& which funds they relate to) Get the latest expert opinion: subscribe to our blogs Set your preferences: choose what you receive by email or view in Myworldwise 04/10/2011 www.worldwiseinvestor.com 23
- 26. The vision • To make thematic, environmental and ethical investing a core proposition for IFAs. • To help IFAs diversify their investment portfolios to de-risk the future: We are in a financial crisis, an environmental crisis looms. • To make advising in this area easy to both give and record. • To become the central hub to IFAs for ethical, environmental and thematic investing news, views and information. 04/10/2011 www.worldwiseinvestor.com 26
Editor's Notes
- Welcome. Thank you to speakers. My Name is Mark Hoskin. I am Managing Partner of a firm of IFAs called Holden & Partners. We have been in the ethical and environmental market as advisers for over ten years. Between 30% to 40% of our money is invested in Worldwise Investor funds. We have just launched a site called Worldwise Investor at www.worldwiseinvestor.com which is free to use and aimed at investors and financial advisers alike. I’d like to talk to you about how Worldwise Investor can help you make educated choices on environmental, ethical and thematic investments.
- Firstly I would like to talk a bit about this market. We are in the middle of a financial crisis at the moment and focus is not on much other than whether the Greek’s will default, if the euro will be here in 2 years and when QE3 will start, of if it will start? Investment fund performance is set to be determined in the short term by macro decisions, with returns being less about underlying fundamentals of stocks. However, there are longer term truths which investors need to be very aware of and position themselves to take account of. The reality is that the world’s population is set to rise to 9bn from 7bn if forecasts are to be believed, while at the same time huge economies are developing, such that billions more will want western type goods. As a civilisation we are consuming more of what environmentalists call our “natural capital” than is sustainable. We are mining to new depths – the Gulf of Mexico oil spill was at 1.5kms deep, we are carving up hillsides and creating lakes of toxic water to get oil from tar sands, we are drilling for oil in the arctic and we are about to “frack” for gas under Blackpool, causing earth tremors. In short, through our commercial champions, society, sanctioned by governments with little vision beyond being elected in 4 years time is getting desperate . It is prepared to go to lengths which future generations will condemn, because we are not on a sustainable course. The next crisis will most likely be a natural resource crisis combined with an environmental crisis. Advisers need to be thinking about this and including investment fund solution providers in their investment mix.
- Firstly I would like to talk a bit about this market. We are in the middle of a financial crisis at the moment and focus is not on much other than whether the Greek’s will default, if the euro will be here in 2 years and when QE3 will start, of if it will start? Investment fund performance is set to be determined in the short term by macro decisions, with returns being less about underlying fundamentals of stocks. However, there are longer term truths which investors need to be very aware of and position themselves to take account of. The reality is that the world’s population is set to rise to 9bn from 7bn if forecasts are to be believed, while at the same time huge economies are developing, such that billions more will want western type goods. As a civilisation we are consuming more of what environmentalists call our “natural capital” than is sustainable. We are mining to new depths – the Gulf of Mexico oil spill was at 1.5kms deep, we are carving up hillsides and creating lakes of toxic water to get oil from tar sands, we are drilling for oil in the arctic and we are about to “frack” for gas under Blackpool, causing earth tremors. In short, through our commercial champions, society, sanctioned by governments with little vision beyond being elected in 4 years time is getting desperate . It is prepared to go to lengths which future generations will condemn, because we are not on a sustainable course. The next crisis will most likely be a natural resource crisis combined with an environmental crisis. Advisers need to be thinking about this and including investment fund solution providers in their investment mix.
- This chart shows the amount of money invested by investment houses in funds classified on worldwise investor, which are all available to UK investors. Thus it includes thematic, environmental and ethical investment funds. In 1985, Friends Provident launched the first ethically screened investment fund with criteria which excluded tobacco, arms, alcohol and oppressive regimes. Since then the market has evolved and there is a large amount of confusion as to what ‘green’ or ‘ethical’ funds do. In fact while these funds can have similar goals, they can be like chalk and cheese. At worldwise Investor an ethical fund is simply one which screens out stocks from its investment universe based on specified criteria. This does not have to have a large impact on the investment universe and says little about the approach, or investment philosophy of the manager. You can see from the above chart that today the biggest monies under management are with Schroders, Pictet and DWS Invest. These companies run money thematically, looking for global trends, such as Agriculture, Water and Clean Energy, with no ethical screens applied.
- The number of funds in this space has grown impressively in five years, almost doubling from 66 to 130. Within this group the thematic fund range has exploded, up almost 300% from 26 to 74. This growth largely explains the increase in funds available to investors in the worldwise investor universe. And it relfects in part society’s view that the environment is the big ethical issue. But also the lack of investment to date and development needed to meet human demand for our basic needs , namely in water, energy and food.
- A growing market (EIRIS) The number of ethically screened funds has also grown in the last 5 years from 46 to 60, a rise of 34%. While this is not such a staggering growth rate, in the period in which we are talking, namely the financial crisis, it reflects a growing consumer interest in ethical issues (armaments, human rights, animal testing) and the idea of ‘responsible’ investing, that profit and principle are not mutually exclusive. Today more than ever the consumer is buying fair trade products and consumer brands can collapse over night with allegations of child labour, or human rights abuses. To an investor ethically screened funds often provide an extra layer of risk protection and reduce specific market risk. This is because many ‘ethically screened’ funds will have SRI analysts to ask questions that others do not consider, but which could have a material impact on a company’s valuation longer term.
- There £21.8 billion invested in thematic, environmental and ethical funds available to the UK investor and featured on worldwise investor. At worldwise investor we have categorised these funds and produced benchmarks which give the average performance of that particular category of fund. This should help us all as advisers understand how a fund manager is doing. Of the £21.8bn available in the investor universe £15.1bn is divided amongst the global thematic investment funds. £7.4bn is invested in ethically screened funds. This figure flatters the thematic range because as you can see £7.3bn has been added to agriculture funds. These include both equity and agricultural commodity funds. The agricultural number includes the Schroder AS Commodity fund, which at £3.1bn has had extraordinary success and is not open to new investors. However, it is remarkable to see that the Agriculture sector has grown in 5 years to be larger than the ethically screened sector which started in 1984. It gives you an idea of how investors have taken this theme to heart. I should point out that there is significant overlap between our classification of global ethical funds and the WWI Thematic benchmark. This is because it is easy to run an ethically screened fund in a thematic way and as you will see from the skandia ethical fund (which is included in WWI Environmental) presentation later on, the screens have little to no impact on investment choice. I have pulled out of the chart above the WWI thematic funds, which stand at £1.96 bn. About £900m of this number is ethically screened.
- So What of Performance: This chart is a screen shot from the fund view of the Ecclesiastical Amity International fund. The table is very interesting because I have shown 5 of the top 10 performers in the worldwise investor universe over 5 years. The graph shows the outperformance of the Ecclesiastical Amity International fund. And it is substantial out performance! The Ecclesiastical fund is an ethically screened fund. The Henderson Industries of the Future and Global Care Growth funds are ethically screened, thematic funds. You can see that 4 of the funds are ‘ethically screened’ funds and have significantly outperformed. You will also note that the average global ethically screened fund (WWI Global Ethical) over this period outperformed the average global equity fund (UT Global Retail TR).
- Here we show what is happening over the shorter term of 3 years. It has been as good a time to be in Asia as over 5 years. But also it has been a period for Agriculture and Water. The chart above shows the Sarasin Water Fund which has achieved a 34% return as against the global equity market which has done 15%. But it is not all upside and demonstrates what can happen in themes, because despite all the incentives pouring into clean energy schemes from governments around the world the industrial companies producing solar panels and wind turbines have suffered particularly badly. As an example, there is estimated to be 6 Giga watts of solar panels in warehouses around the world. Supply is outstripping demand. It is good for the consumer because the price of electricity from solar is dropping, but it is a terrible market for producers of solar panels.
- The one year story is not really different to the three year picture. It has been an extraordinarily difficult market to make money in. In the chart I have shown the Schroder AS Commodity fund which is not open to new investors, but which has £3bn under management. Again you can see that Clean Energy has not been a place to be. Indeed as a sector it is back to the level it was just after the collapse of Lehman brothers in 2008.
- I have not really talked about climate change in this presentation. The science behind climate change is in part driving government policy, but the companies which will benefit are the same who are addressing our environmental and natural resource issues. It is about making what we have go further, driving costs down and thus making higher profits relative to the competition. We hear complaints today about the amount of government support for renewables from the fossil fuel industry, but Government support for fossil fuels in 2008 could be as high as $557billion. Imagine what would happen if this moved to renewables. Renewables will have their day and could be the Agriculture fund of the future.
- Single theme funds are much higher risk. Funds which have a wider remit are more appropriate to most investors. Do Sustainable funds outperform? For many, the definitive guide to this question came in 2007 with the joint publication by Mercer, the investment consultant, and the UN of a report [PDF 1.2MB] which reviewed 20 academic studies on the topic. The headline result? 10 of the studies found evidence that SRI funds actually outperform, 7 were broadly neutral or marginally supportive of their outperformance and three found evidence that SRI funds underperform. Since then there have been numerous additional studies, the majority of which have also found that SRI strategies generate outperformance. The most recent of these – a study by RCM (part of Allianz Global Investors) found that ‘investors could have added 1.6% per annum to their returns over a five-year period by allocating to portfolios that invest in companies with above-average ESG ratings’. ESG stands for Environment, Social and Governance and is a key part of what investment houses term “Responsible” investing, which you may hear more of in the future. It is about being aware of risk factors that others are not considering. Warren Buffett has famously put it, “You don’t know who’s swimming naked until the tides goes out”.
- BT Pension fund (3.7bn) are dipping their toes - in June 2011 made a £100m investment into a carbon tilted FTSE 100 tracker run by L&G. Single themes carry high risk – Agriculture / Clean Energy. Do not be afraid of recommending an ethically screened fund to your clients. Include a multi-thematic, or multi-asset fund in your portfolios. Have a look at the funds on review today, from Skandia and Ecclesiastical, but also for environmental exposure with a comfort blanket look at: Cheviot Climate Assets fund: A global multi-thematic and multi asset fund with a target yield of 3%. Pictet Global Megatrends Selection: A global Multi-Thematic fund investing in 9 equally weighted sub funds: Agriculture, Biotechnology, Clean Energy, Digital Communications, Generics, Premium Brands, Security, Timber and Water.
- There is not doubt that there is an increased awareness and interest in thematic, environmental and ethical funds and it is fuelling a need for a greater breadth and depth of information and more straightforward and transparent access to key facts and figures in one place, enabling investors to make better and more informed investment choices. Looking at individual factsheets posed the following problems: Not enough information in this area were contained on the factsheet Ethical criteria is missing Inconsistent information is reported Inability to provide reports on themes No categorisation of funds so it makes it difficult to make comparisons
- So Holden and Partners created the Guide to Climate Change and Ethical Investing. We started this in 2007 and produced our 4th guide in 2010. This was all very well but the problem was still that: It was a static document Old media so became out of date Not easily assessable Not interactive! A bit old fashioned.
- In partnership with the 6 investment houses Holden & Partners have set up Worldwise Investor in order to improve the information which flows between Investment Houses, Investment Advisers and Investors. It is an industry initiative to improve knowledge all the way from Fund Managers down to private investors. We have given each of these investment houses the ability to
- The main focus of Worldwise Investor is the fund library (which I’ll demonstrate later) Currently there are 130 investment funds to compare. We have: Global Ethical Funds 17 UK Ethical Funds 24 UK Ethical Bond Funds 7 Agriculture Funds 15 Water Funds 9 Clean Energy Funds 12 Multi-thematic Funds 17 Environmental Funds 13 Multi Asset Funds 7
- You can Filter funds by: Region Theme Asset Class Ethical Screen Platform To filter the funds you need to a manageable level. You can then make a pdf copy for your file and attach it to your back office system, or use it to send to your client.
- Each fund has a Worldwise Investor Fund View. So now you should be able to get the same information for each fund, making your job easier. We provide a worldwise summary. We include a fund manager summary. We put down any ethical criteria each fund has. We give sponsor’s access to the content manager system to enable them to keep you up to date with the news on each fund. We tag any news story we feel is relevant to a particular fund to give you greater background.
- The Investment Houses have sponsored this initiative to make your lives easier. This site gives you all the information you need in one place to know more than your client and advise confidently.
- We have developed the my worldwise section of the web site to enable you to focus on which funds you are following and ensure you receive news on the funds you need. This is designed to cut out the background noise and to de-clog your inbox.
- In summary: 1). You do not need to be afraid to give advice in this area or feel that you need to devote huge amounts of time in understanding it. Worldwise Investor is doing the work for you. 2). In our experience all clients understand and appreciate the fundamentals behind having exposure for some of their investments to the thematic, environmental and ethical investment markets. 3). In our experience advising in this area adds interest to the client relationship and differentiates your advice and ability from the crowd. 4). Investment in this area makes clients feel good about themselves and it positions them to ride a future investment wave. There is no downside to dipping your toe in this market.
- So find out more about this area and select and monitor funds in this area by registering with Worldwise Investor.